Event Stop

Fundamental analysts do make use of technical tools, if only for determining the trigger points for a trade. Take profit, and stop loss orders are used by almost every trader in the world, and its is unthinkable that a serious analyst will not have a condition, at least in mind, for closing an open position, however convinced he may be of its ultimate validity.
But fundamental analysts are not limited to technical tools and the price action for determining when to exit a trade. The event stop that we would like to discuss here is a tool that the trader can use to determine a trade’s exit point.
When using the event stop, the trader will ignore the price action for the most part (and will use low leverage), and will only close a position in the red when the scenario he had pictured in his mind becomes contradicted by events. For instance, a trader is anticipating that Bank A will be nationalized by the authorities of Nation X, and he expects that this will lead to X’s currency depreciating against its counterparts. In consequence, he shorts it. He will refuse to close the position until authorities confirm and clarify, in a solid and unmistakable fashion, that they will refuse to nationalize Bank A. In the meantime, he will be willing to put up with all the rumors, extreme swings, and short term fluctuations in the market without worrying about the unrealized profit or loss in his account.
As we mentioned at the beginning, the event stop is for those traders who know what they do, and who possess the track record, the intellectual background, and the confidence to use it. But do not take our word in order to evaluate your own skills; you should know yourself better than anybody else, and if you believe that you understand the economic dynamics of the era, and can defend your claim in your trading activities, you will be perfectly capable of using the event stop