R-Zones for Entry and Stop

Bob Iaccino, Chief Market Strategist and Co-Founder of Path Trading Partners, joins us live every Thursday from 11am ET, as our risk management educator.

With 30 years' experience working as an active investor in equities, commodities, futures and FX there are few better to talk on the subject of risk management.

Bob has developed a method for breaking down his key fundamentals of risk management, in a way that he thinks retail traders can understand and use to get actionable insights to bring into their own trading.

Below are some excerpts of Bob’s thoughts from a recent live session.

If you’d like to save your seat to watch and participate in the next session, register here.

Why Use Exponentials When Looking for Entries?

I always include the 50-day exponential moving average on my chart when searching for entry points. I also consider a few other exponential moving averages.

Why? Because they perform better in tests. A 50-day exponential moving average consistently outperforms a 50-day simple moving average when you analyze the data.

Do You Look at Any Other Time Frames When Searching for Setups?

Yes, I do. I examine the four-hour and hourly charts, mainly to fine-tune my entries. The majority of my analysis is conducted on a daily chart. I recommend using intervals of three to four, or if that's not possible, two to three. For example, if you're looking at a 15-minute chart, you should also consider the 30-minute and 60-minute charts. If you're looking at a 5-minute chart, you should also consider the 15-minute and 30-minute charts. Using multiples of three works best because it tests out well, possibly due to a Fibonacci or inherent human nature pattern.

As a Trader, Do You Prefer Large Caps or Small Caps?

I prefer large caps, including tech and other sectors. The reason is simple: large caps have more volume, more data, and more reliable moves.

If you want to explore small caps, look into high-performing small-cap funds. Find their holdings and analyze the stocks they have in smaller percentages, such as 1%, 2%, or 3%. These are the stocks they are just starting to invest in and might become movers.

My preference remains with large caps because their price action and fundamentals are better tested.

Why Is Diversification So Important?

The simpler you can make your entries, the more charts you can analyze, and the more assets you can trade. This approach aligns with the number one recommendation for any diversified investor: diversification.

Even if you're trading just one stock today, you're still diversified because you’re choosing the one most likely to succeed based on your process. You minimize exposure to less promising stocks. This is why diversification is so powerful.

Disclaimer: Live Sessions (hereafter referred to as the “Content”) are produced by TradeZero. The Content may include the views and opinions of TradeZero and a third-party participant, Bob Iaccino. Bob Iaccino is compensated by TradeZero for participating in the Content. Mr. Iaccino’s trading experiences and accomplishments are unique, and your trading results may vary substantially from his. TradeZero is not responsible for and neither affirms nor endorses any of Mr. Iaccino’s views or opinions expressed in the Content. TradeZero makes no representations or warranties with respect to the accuracy of the Content or information available through any referenced or linked third party sites. The Content has been made available for informational and educational purposes only and should not be considered trading or investment advice or a recommendation as to any security.

Trading securities can involve high risk and potential loss of funds. Furthermore, trading on margin is for experienced investors and traders only as the amount you may lose can be greater than your initial investment. Likewise, short selling as a securities trading strategy is extremely risky and can lead to potentially unlimited losses. Options trading is not suitable for all investors as it can involve risk that may expose investors to significant losses. Please read the Characteristics and Risk of Standardized Options, also known as the options disclosure document (ODD) at https://www.theocc.com/Company-Information/Documents-and-Archives/Options-Disclosure-Document before deciding to engage in options trading.

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