How to place Stop Loss

How to place Stop Loss

Using Stop Loss at any time we enter the market is one of the ways to manage our risk in trading. While some other merchants to see it as a sissy way, I do not ... .. I want to trade using stop loss. And that brings me to good results at the end of the day. Keeps me stick with well controlled trading system.

When you decide to use stop losses, then we have to be discipline in implementing it. If the market price moves so close to our stop loss, then we can not do anything. Do not ever try to replace your stop loss at a higher level of your open position level.

Replace your stop losses for one reason only:
Trailing Stop strategy (although I rarely use the trailing stop strategy).

Now the problem is ... where we need to put stop losses on every trade? Here are some tips that could give you:

1st Measure the gap between your stop loss and your open position level.
Usually I use these rules:

EUR / USD: gap between stop loss and an open position = 35 pips

GBP / USD: gap between stop loss and an open position = 50 pips

They represent the maximum loss that could handle in each transaction. Keep that always in mind. We will not enter the market without this gap rule.

2nd Entry strategy
You can then provide your best entry level using your trading system. And when you decide to enter the market at a certain level (using your trading strategy), do not forget to pay attention to your stop loss. When your stop loss will be set using the advice gap rule # 1.

Try to put your stop loss below support level (long position) or a higher resistance level (for short position).

For example:

We EUR / USD support and resistance levels:

R3 1.3052

R2 1,2962

1,2906 R1

Pivot 1.2816

S1 1,2760

S2 1,2670

S3 1,2614

Then, after measuring this trend, you noticed that 1.2870 is the best place for a short EUR / USD. That means, using the 35 gaps rule (see point # 1) Stop your loss would be at 1.2905.

Unfortunately, 1.2905 is a good level to place your stop loss. Why? It is protected by resistance level. When the market moves up, your Stop Loss is not well protected by his technical factor. So it would be quite easy for marketers to hit your stop loss. The nearest resistance is 1.2906, above 1.2905. So what do we do here is to move our stop loss slightly above 1.2905. Let's say we move to 1.2910. Now technically, you have a good protective stop loss.

When you move stop loss, do not forget to void the rule (as we said in point # 1). So we need to move also plan our open position.

And now, your plan to become short in 1.2875 (5 pips above 1.2870) and Stop Loss 1.2910 (5 pips above 1.2905).

3rd Calm down, when the market heading as close to your stop loss.
Anything can happen in Forex in a very short time. No one can control people's madness when you enter the market. But the most important thing in dealing with this crazy world is' risk management. "Successful traders know that sometimes they had to deal with no trades.

So if your stop loss is hit, let it go. It's just the way it is.