Many newbies ask me how many pips is safe for stop loss? I think its all depend on how much you afford to lose and we have to put stop loss by checking resistance and support levels, we should not put stop loss just by numbers. Share your views...
how many pips? hmmm let me see.... five? with x100 leverage you simply can't afford more, since its 5% per one stop! you: oh, but that would mean i could hit 56 stoplosses in a row? me: you bet! you: nonononono i dont want that. me: allright, 300 pips and always add to a losing position. this way you'll hve 99% winning trades, man you, ok, thats sounds much better!
My earlier post containing the terms MAE and MFE refers to Maximum Adverse Excursion and Maximum Favorable Excursion respectively. I was asked to elaborate, but the explanation is complex. You can find a full explanation in an article I wrote for Futures magazine called "Know When to Get Out." It will be in the online Futures archives; the publication date was March, 2007. If you have any trouble with that, PM me and I will send you a copy.
20 to 50 pips stop loss is safe . Stop loss should be choose according to the lot and capital . If you had a high capital and using low lot you can set stop loss at higher pips .
The stop loss distance is unimportant. Stop losses should only be based on technical support levels. They simply are what they are. Now, how much you lose when the stop is hit is important. That's position sizing; it's way more important than "how many pips".
Yeah, stop/loss should be based upon the price action on the charts if the trader is using charts. Yet, if the price action has a stop/loss too big for the risk on the trader to take... Best to ignore that trade signal and wait for another trade that has a price action producing a technical area for risk tolerable trade. Another option is to lower the lot size when taking on a stop/loss that's too big for the trader's risk. Another way to look at it. Using fixed stops for different types of price action a trader will be trading is a contradiction because price action is not always the same.