Sometimes, I don't understand why a trader could be convinced of not having a Stop Loss while we see almost every month an unexpected uncounted impulse (I would call it Best of the Test for whom with less of the rest) in the market.
There is no specific rule as to where you should place the stop loss, so consider the below mentioned tips as the general rules and ask your mentor to fit reliable Stop loss rules just for you and your trading system(If you have one?).
- Many loser traders do place the same stop loss for all the trades they execute without even trying to measure market environment.
- Don't be scared of placing a stop loss while it is for your gain and you must know what your profit objective is.
- Stop Loss should not be too close to the current price while most of the stop loss enemies have ruined their trading accounts already just by using very close ones.
- Stop Loss should not be too far from the point you get into trade while it's better to not placing any Stop Loss rather taking an unreachable, fictional protector.
- Try to not to risk more than the points of your profit goal. Pro traders recommend to only take those trades which have at least 2 points of potential profit per 1 pip of potential lose, but I would say it is completely depends on the money management system that you use, as different money management systems has different recommendations for Risk & Reward.
- Sometimes a trading system does not work if you risk less than recommended %7 to %10 of your total account balance. It means you trade oversize or you just entered the market when everyone else getting out of the market. In this case this is not your fault as it has a clear message for you "don't trade this way anymore and ask an expert to solve the problem".
- If you are convinced enough that you can make up 1 million dollar out of your 10000 dollars account by not using stop losses as you may think you are the one who knows the price will be back on its way to you instead of hitting new highs, well, simply you are wrong.
- Remember, there are no sky limits for the price of any of currencies in FOREX market.
- If you don't like to place a pre defined Stop Loss on your trades, please ask someone to show you how to follow a wining trade by using "Trailing Stop".
- Be sure it is better to have one or two losing trades with 100 points of lose, instead of being desperate with sinking into -1000 pips of dizziness.
Try these tools to define the most accurate stop loss points easily:
- Use N pips over/below the first Parabolic SAR spot(dot) appeared over/below the price candles for Short/Long Trades.
- Use N pips over/below the day before yesterday's HIGH and LOW and in the case of the market has moved a lot far, use N pips over/below the yesterday HIGH and LOW as a Stop Loss point for your Short/Long trades.
- Use two Moving Averages of 55 EMA and 144 MA. You may place your
stop loss just N pips below/above one of those two MAs depending on how
do you set up the profit/loss game for your Long/Short trades.
- Place the Stop Loss N pips over/below Bollinger Bands Upper/Lower band for Short/Long trades.
- If you use Elliot Waves theory to analyze the market.
