Have you ever been in a trade that was a textbook setup and you thought you landed a great trade when all of a sudden it hit your stop, took you out and then it worked and hit your target?  

I am sure you felt a bit of unsettled emotions as this played out before you on your trading screens at your desk.  As a trader you have to get smarter and learn from these little tricks the big boys do to throw us out of our trade. 

Trade Example

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On October 17, 2014 COF (Capital One Financial) gapped down on earnings and looked to be in sell mode the entire trade day.  After COF’s wild open on the gap down it set about a $1.20 trading range and looked to see if a retracement to low of the day was in the cards.  

The ideal entry short would have been at $76.15 with a stop at $76.79 and a target of $75.50.  After being short COF most of the day you would have wanted to trail your profits.  The widest stop you could have done would be to keep it the same over the high of the day.  

But knowing most traders’ logic they would go with breakeven at $76.15.  After basing for over two hours in the money COF threw up a wild stop hunter move and threw everyone out at $76.15 to only later tank lower to $75.23. 

Keep Your Stop Wide

I honestly prefer to see the push up higher before I get short.  I love to see these head fake moves.  They give me more confidence knowing the big players want your shares because they are taking it lower.  If you have to get into the trade without the head fake first, keep your stop wide over high of the day to ensure you don’t get thrown out prematurely.

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