hi everyone is there any particular rule of thumb for setting forex stops? IE- do you set stops at a particular amount of loss? or percentage of loss? or just above/below support/resistance? or? thanks
The most basic is to set your stop above or below, depending on the direction of the trade, the nearest point of heavy support or resistance. Count how many pips away that is from your entry and divide that number by how much you are willing to commit on the trade and you also come up with your position size.
I set mine above/below the last swing point. But I also will use the nearest sup/res level as well - perhaps a pivot, or the session open price, etc. Also, don't set your stop right at the exact point of the sup/res as price sometimes likes to test these areas without actually breaking them.
Regardless of the market, forex or stocks alike, setting stops based on how much you are willing to risk is not wise. The market doesn't care how much you can afford to risk, and wont move accordingly. Set stops where the market has a lower probability of reaching relative to your profit target. Determining the probabilities is the tricky part.
You can time your entry in the lower time frame and exit if it reversed, always get out if it gets choppy or undecided one way or another... and try use the trend to your advantage, don't trade against it. sg20
It depends on your personal strategy. Many long term traders don't set stops at all. Be aware that in the Spot Market, setting your stop at 50 pips or less, your broker will change quotes so that he runs your stop. Of course this doesn't happen at all in FX Futures, entire market as a whole moves below your stop.
I don't trade forex but have looked at it recently. If you're asking these questions, you may want to paper trade at first. Some people tout the 'more straightforwardness' of currencies but there's PLENTY of variables.