How Much Stop Loss Are Appropriate?

Hi there,

Anybody can point me to the right direction on how to set my stop loss appropriately?

Quite many of the time when i place a larger stop loss, the price hit my large stop loss and end up heavy losses.

But when i place a small stop loss, the price seem like tend to hitting the stop loss line very frequently and i have to repeatedly place multiple orders with the same small amount of stop loss and toward the same trend for a currency pair. With small stop loss, even i catch the right trend for a certain pair and earn significant amount of pips but overall i still having negative profit because i have lost quite many pips from many small stop loss trades during the starting of the trend.

Can you give me some guideline on how to set a appropriate stop loss?

Thanks

 

Well its better to analyse the market well before making the entry you just concentrate on trend and on market then you will be able to place the stop loss properly.

 

Hi intervention,

Thanks for the advice.
Can you point me to the right direction on how can i analyse the market? Anything that i should pay attention?

 

How you pick stops should depend on what kind of price movement you're trying to catch (trend or mean reversion?). Once you figure that out it's as easy as picking a price level that violates that price pattern (say you're trading an uptrend, it's not going to be an uptrend if it makes a lower low is it?), then once you have that price level you adjust your size according to how much you're willing to pay for the opportunity.

 

No such thing as a stop! lol J/P

Happy Monday Guys!

 

A broad question! Can you post annotated chart screenshots of your recent trades?

 

Are you a trend-follower or a counter-trend trader?

Definitely post some charts of your trades.

 

The market oscillates because it hits stops. Since it oscillates most of the time, it hits stops most of the time.

If you watch the market for maybe 10 years, you might become good at knowing what it does.

What is your budget for trading?

 

Let’s see if I can add any value

General considerations (in no particular order)

Until one gets the pieces aligned – placing stops is like solving a multi-layered puzzle

The components: (well at least some of them)

Knowing that staying wrong longer, does nothing but burn one’s capital (wrong is wrong)

Knowing once entry made – the trade better work fairly quickly

Being able to read and identify the better setups – ones where risk is several orders of magnitude smaller than the move’s potential to profit (not to be confused with what many term as R:R – mkt is uncertain – how much price may / will move is always unknown - as is each trade's R:R if truth be acknowledged)


MTFA – one must know where price is/ and is likely headed in the bigger picture – and where potential S/R resides (an interjection; R in an up move (uptrend in typical vernacular)…, like S in a down move (downtrend in typical vernacular) – is typically not a valid set up – for obvious reasons)

Being able a to identify a level… that if/when price breaches that level – that trade has failed (btw; using the last swing H/L is never a good idea - its too obvious - unless momentum present)

Being patient enough to wait on these better set ups to materialize

Knowing the typical behavior (volatility/ volume/ penchant for trending, retracing, ranging) of the instrument you’re trading… and the typical traits it exhibits throughout a trading session – along with the typical times throughout the session these likely occur

Note;

Learning an instrument’s behavior is all about being able to read / interpret the buyers and sellers presence / actions / intent / commitment – and nothing more (keep your opinion out of it)

To continue;

Stop loss placement has nothing to do with amount risked (may sound counter intuitive, but it is what it is)

If a wider stop is (has to be??) used, reduce size to keep risk constant – the ultimate goal is to develop the ability to read / id better entries – and have the patience to wait till these better entries (set ups) materialize

Btw, and imo - the need to use wider stops is nothing but a band aid (cover up) for one’s trading shortcomings – harsh but fact

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Aside;

Some use…, what others define as “stops”…, as an opportunity to reverse and enter in the opposite direction – and though viable…, it’s also a great way to get chopped to death

It takes skills to pull this off successfully on a consistent basis…

I would respectfully suggest you first learn to read / identify/ trade – better set ups

Then stick to a regime of; id a low risk set up / enter / exit – id the next low risk set up / enter / exit – wash / rinse/ repeat

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Impatience in this business… or the unwillingness to thoroughly develop a skill before attempting/ progressing to, the next – is a real bitch - please trust me on this

Hope this helps if only a smidgen

RN

 

The stop-loss, your exit and your optimal position sizing are all determined by the rules of your trading system. Of course If a trader has no clear, predetermined and backtested rules then he has no business trading in the first place, period.

You cannot initiate a trade and then later say : 'Ok, now where do I place my stop, here or here?", it simply does not work this way.

Trading is a serious business and the market will slowly but surely take all your money if you are not 100% prepared.