While it could lock in a temporary profit, it will also more often than not lock the trader out of really
big price moves in the favoured direction.
And Tchir thinks that as we see more
big prices moves and more stories about how big these price moves are, fear will continue to act as the dominating theme in markets.
If pre-placed buy or sell stop order are triggered,
bigger price moves can immediately follow.
BIG PRICE MOVES — Today the S&P 500 (SPX) Index fell 2.1 %, the Cboe VIX of VIX Index (VVIX) rose 18.7 %, and the Cboe Volatility Index ® (VIX ®) rose 28.5 % -LSB-...]
For our purposes here today, you should know that an event area is a level or a small area / zone on the chart where
a big price move started from.
Over 100 years of market history reveals that the market's biggest winners typically have an 80 or better RS Rating as they begin
their biggest price moves.
We also want to know if the days when prices rise outnumber — and result in
bigger price moves — the days when prices fall (momentum).
In reality, the events that cause
the biggest price moves (like M&A activity) are already closely monitored.
The good news on spreads is that the range values are much larger to benefit from
a big price move.
This suggests
a bigger price move is on the horizon.
If a stock is particularly volatile, the chance of
a big price move will be baked into the price of the stock options.