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Stop losses may be determined in any of several ways as previously discussed. You may use a strict money management stop, in other words, risk a fixed dollar amount on each trade or you may use a specific technique for stop loss placement.

The money management or dollar risk stop is self-explanatory; however, I remind you that larga stop losses are often preferable to smaller stop losses, since markets do need room to negotiate their moves.

In terms of time frame, I recommend using between 5-minute, 10- minute, or 30-minute data. Anything shorter than 5 minutes would be too short, and anything longer than 30 minutes would not allow for sufficient time before the trading session ends.

In Summary In the final analysis, I recommend against the use of MA systems for the purpose of day trading. Although there are variations on the theme of moving average (to be discussed), the vast majority of methods do not yield much more than losses and commissions.

Avoid these systems since they are not likely to serve you very well. The use of MA systems, however, with support and resistance as trend indicators, does have good potential, but it is difficult to subject to a rigorous test. The application of the stochastic indicator (SI) as originally developed by George Lane offers considerable potential for day traders as well as position traders.

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