Stop Losses and Risk Management [FX]

Discussion in 'Risk Management' started by mystery23, Feb 14, 2010.

  1. mystery23


    So I have been trading the FX Markets for a while now, with my own Trading Plan where I put a 10 pip stop loss and 15 pip profit target. It works well with my entry signals and usually gives me a proper exit.
    I am trading the 15 min charts.

    Recently I have been trying a new trading system which generates more frequent and decent entry signals for me. This makes it easier for me to enter the market with more confidence.

    The problem with the system is, I still desire only 15 pips a trade, which is reasonable, however the system dictates to put my stop loss over the recent swing high or the recent 5 EMA.
    My dilemma is that this stop loss place does not match with my risk tolerance of 10 pips, and most recently I took a 3 % hit because of this requirement.

    How can I find the balance between my trading plan and this system's requirement?
    Do I need to adapt position sizing to every trade based on where the stop loss is bound to be? If I did, than don't I need to target more pips in profit to make up for the position sizing?

    I would really appreciate the guidance.
  2. speres


    If you increase your stop loss then you definately need to reduce your size, keep within your % of account risk not increase your risk, you dont target more pips because youve increased size....
  3. Step 1: Figure out what percent of your bankroll corresponds to 10 pips loss with your current position size. This is the risk percent.

    Step 2: Adjust your position size so that the risk percent with your new stop method is the same as before
  4. TheMan


    stops should be based on PA, not a predetermined #

    if the stop is too big for a particular trade

    1. dont take it

    2. reduce position size