How do you calculate your stop?
Our trades are usually in a leveraged ETF, which is an instrument that follows a particular commodity or index. So, while they are designed to track those instruments, they don’t do so exactly. So for charting purposes we still use the specific chart for that underlying commodity. For example, when trading Gold we may use DGLD for the trade, but still use GOLD for the charting. That’s simple enough, but the tricky part comes in trying to determine where our stop price will be in DGLD. It’s simple enough for us to see where it is on the GOLD chart, but is impossible to nail down with the same precision when transferring over to DGLD.
As such, we will issue our stop prices like this. DGLD stop: GOLD $1280.20 / DGLD ~$46.50
This indicates the exact point in Gold that would trigger our stop trade, and gives an approximate price of where we expect DGLD to be trading at that time. The emphasis then is on the GOLD price. If the stop price becomes in play we will issue an alert specifying if the stop price in DGLD needs to be adjusted.