A Quick Market Lesson (GOOG)

In my rik management article, I talk about never placing stops at whole numbers and if you can avoid it, try not to place stop loss orders on the books with your broker. The market makers and all kinds of Wall Street participants can see where you have placed your stop. When a bunch of stops are congregated in a particular area, you can be sure if it's within reach of the market makers. etc, they go for it and try to knock those stops out. In doing so, the create volume which creates profits for them, whether it be the difference between the bid and ask (the spread-which is their profit) or volume rebates or just popping off one of their own positions, they stand to gain.

Take a look at GOOG's intraday chart...

 Error # 1, stops were placed at extremely visible intraday support. Error #2, the stop level was a whole number- $579.00. Error #3 as evidenced by the immediate turn up in volume, the stops were placed with brokers. Just look at the volume the minute $579 was breached by a penny, volume surged as the stop loss orders were triggered.

For those of you short term trading/day trading and using 3C, the signal of a negative divergence was pretty clear, it's especially more accurate as GOOG has been range bound and this is often where we find accumulation/distribution so when you see a negative or positive divergence in a lateral trending market, the chances are that it is VERY reliable. That being said, it's still a 1 min divergence which is the realm of intraday movements, helpful for day traders, but not very meaningful for longer term traders.