Wouldn’t it be great if we knew just how the market was going to behave at all times and what the best place to put our stop order was? If there was one place relative to our entry which would consistently maximize profits and minimize losses, trading would be far simpler. Unfortunately, this is simply not the reality that traders face. Markets are by nature quite changeable, especially when day trading. Whether something works for a few trades or a few months, ultimately there’s likely to be a point where you need to adapt what you’re doing. Understanding the different circumstances that can impact upon the best ways to manage your stop can have a positive impact on your bottom line.

Capital markets and commodities are tied together through capital flows. Money moves in and out of asset classes in somewhat predictable ways. Part of the trading game involves figuring out what the current relationships consist of. Another part of trading is figuring out when those relationships break down or change.

There are many ways to track these correlations or non-correlations. Some traders or firms spend large sums of money tracking the way markets move in relationship to one another. They utilize computing power and high level mathematics to hone their strategies. Many of these strategies revolve around micro structures, bids and offers on very short time frames, in related markets. Speed to market and trading costs play a role for these entities. Firms can trade tens or hundreds of thousands of contracts or shares in a single day.