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Of the two stop methods, I prefer the money management dollar stop loss because, in many cases, the day's price range will have been too narrow to permit a reasonable stop loss to be placed. Let me be specific about the buy condition which occurs after a gap lower opening.

First, I'll begin with an example. Assume that March S&P futures establish a daily trading range yesterday of 410.00 high, 408.00 low, and 408.50 close. A gap lower opening will establish the first condition for a possible GO buy signal.

You know yesterday's high, low, and close (for this method knowing the close is not important). The market opens today at 407.50, 100 points lower than yesterday's close and 50 points lower than yesterday's low. The first condition for a gap-buy-trade on a lower opening has been established. Due to the gap lower opening you would now enter a buy order by placing a buy stop or a buy-stop-limit, two ticks above the low of the previous day which would be 408.10 (408.00 + 0.10).

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