Below are today’s likely price locations for buy and sell stop orders for the active Comex gold and silver futures markets. The asterisks (**) denote the most critical stop order placement level of the day (or likely where the highest concentration of stop orders are placed that day).
Below is a detailed explanation of stop orders and why it can be beneficial for a trader to know where they are likely to be in advance.
Stop orders defined
Stop orders can be used in trading markets for three purposes: First, to minimize loss on a long or short position (protective stop). Second: To hedge a profit from an existing long or short position (protective stop). Third: Open a new long or short position. A buy stop order is placed above the market and a sell stop order is placed below the market. Once the stop price is reached, the order is treated as a “market order” and executed at the best possible price.
Most stop orders are located and placed based on key technical support or resistance levels on the daily chart, the breach of which would significantly alter the short-term technicals of this market.
If an active trader has a good idea in advance of where the buy and sell stops are, he can get a better idea of at what price level the buying or selling pressure in that market will increase.
The main benefit of using protective stops is that before you start a trade you have a pretty good idea of how to get out of the trade if it is a losing trade. When the trade becomes a winner and profits start to grow, you may want to use trailing stops, where protective stops are adjusted to lock in a profit should the market turn against your position.
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; However, neither Kitco Metals Inc. nor the author can guarantee its accuracy. This article is for informational purposes only. It is not an invitation to exchange goods, securities or other financial instruments. Kitco Metals Inc. and the author of this article shall not be liable for any loss and/or damage arising from the use of this publication.
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