Setting Stop Losses Using Support & Resistance

Discussion in 'Forex' started by LearningMarkets, Aug 19, 2008.

  1. LearningMarkets

    LearningMarkets ET Sponsor

    My favorite method for determining where to set stop losses is using support and resistance levels. Many investors consider this method of setting stop losses to be too arbitrary to be consistently implemented, but I think using support and resistance levels is much less arbitrary than some of the other methods we will be discussing this week. After all, we all know that price doesn't lie, and when we can identify price levels where traders have been reluctant to move beyond, we have a clear indication that stop losses set beyond these levels should be relatively safe if the trend continues in the way we forecast it will.

    Of course, you do run the risk of being whipped out of a trade if you set you stop loss too close using this method, but you run that risk with any stop-loss method you may employ.

    Check out the video at this link to learn more about this methodology: