Consolidating markets are tough for stops based on directional price action. It’s not the norm for any market to move straight up or straight down. Along the way, the market usually retraces. Unfortunately, you never know if the pullback is simply a market that is consolidating or if there is a fundamental shift in the market’s direction. Since stops treat both situations the same, when a stop is triggered, you are forced out of the market.
When you use an option instead of a stop loss, especially in a fast-moving market, you can expect not to lose more than the strike price of the option.
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