Ask Colin

What should trigger stops on weekly charts?

The detailed question was:

I use WEEKLY line charts to select buys based on your higher trough/higher peak model and set my stop-loss/protect profits points accordingly. What I am unclear on is, barring large price falls, should the stop-loss be triggered by:

(a) intra-day breaks;

(b) daily close breaks; or

(c) only, when the weekly close is below the previous trough level?

If you are using a weekly line chart, then you are plotting the weekly closing price. Logically, this means that you should disregard the current week until it is over, because you do not know its closing value, even though your charting package may plot something for the current week.

Whether you use the weekly close or an intra-week close is your choice. Logically, I suppose you should use the weekly close only, since your chart would not show intra-week signals unless the week closed appropriately relative to the high or low.

My own approach is to use the highs and lows to determine trends because they are support and resistance levels, whereas closing prices may not be.