Stop Losses

[mccarthy]

HI i am new to this game and am currently practicing on a demo account, and trying to get a bit of a feel.

I seem to be having a bit of a problem in setting stop losses and was wondering if any one had some suggestions.

As an example last night Aus time i was trading betwen ressistance and support bands for the ERU. I entered a short position at 1.0013 and set a limit around .9990, and a stop at 1.0025 should have been a profitable trade at the end of the day with the ERU around the .9990 mark this morning except that the ERU spiked up to 1.0032 and kicked in my stop loss.

I am not sure if any one can help i seem to be either setting the stop losses to short or too long. Any suggestions would be appreciated.


Thanks

[alvinhan]

remember this, if you choose to stop loss at 20 pips, then set take profit at 60 pips.

[anatrader]

Hi mccarthy,

I am no expert but here's my thought on the subject...

Seeing as you're in a demo here's my suggestion. Keep a journal of all your trades making sure you keep track of worst and best. For example if you buy at .9960 and it goes as low as .9932 then as high as .9994, keep all those figures in a spreadsheet. Then for each trade calculate worst pips, best pips and actual pips. This will then allow you to play around with different stop losses so as to maximise your profits. If you find that your system finds you winners a large percentage of the time you may well be able to put a 40 pip stop for 20 pip gains on the other hand if your hit rate isn't so high you may have to reduce your stop. In any case if you set up your spreadsheet correctly, once you've accumulated some data, you'll get a good picture.

Hope this helps.