Stop loss questions

[patrick_fx]

Hello traders

What would be a good method to determine a stop loss? I trade full NY time half Euro time. I trade short term hoping to catch 20 – 50 pips for each position. I’ve read some articles about the risk reward ratio like 1:3 1:2 etc. It never worked for me because if I target to gain 30 pips profit my SL would be -15 pips (1:2). Fifteen pips SL is too narrow for many ps (I trade the most major ps except JPY related ps). So I stop using SL. Things worked great for a few months then one bad trade took away most of my profit. :-( It made me realize that I need to find an effective SL. Please help.



Thank you
Patrick

[trendfollower]

Hi Patrick

You are on to a hiding to nothing trading short term with conservative SL`S. Try trading longer terms with a more realistic stop loss. Consider trading with more than 1 currency p at a time & trading mini lots which allow you less expensive stop losses. Not unusual to be in 3 trades at the same timeall trades being at various positions of profit/loss. Positive trades allow you to ride out profit taking/retracements on trades that are in a negative position & that requires a realistic stop loss. Nothing worse than getting taken out on a trade because your stop was too tight only to turn & continue in your chosen direction after it has taken your money.

[ukt]

Patrick_fx:
Your post is just what the doc ordered. I've some simple methods I use see my ramble below BUT am always interested/willing to rethink/shape my methods in the unending quest for better understing

I've been getting into cles of late simply being driven by price action around various fib levels. (Vegas's Tunnel Method http://www.freewebs.com/mswilson/ one of many forums http://www.forexfactory.com/)
[for me] This basically price action only sure keeps FX life simple [if poss!] But of course any selection of formations/patterns are going to cause grief now 'n then stops are [as you've found out] generally a good idea!

My take on stops [ my thinking/methods] are this:
1. having identified potential price reversal area
2. having drawn the obligatory trend lines for current support resistence
3. Let/wait/be patient for price to confirm [or otherwise] my potential reversal area I finally [assuming I get price confirmation + (the cles are still showing me messages of reversal) kinda subjective stuff this but practice as they say does help! ]
4. place trade
5. stop placed at most recent support/resistance low/high.
6. a stop placed as in 5. above requires one to underst the money management/risk issues since if using day session timeframes that stop may well be for example 100 pips. However given that some work some do not work etc. What's the big deal here?

For sure anyone just placing a trade with a 100 pip stop who also has not really done the required homework does not have all the other stuff firmly in place like: plan/method/system risk money management not forgetting a knowledge that [with the current setup] profit is possible...
Well then--- these types may just be the one's paying ME my profits

Here the issue as I see it is to do the drill not think. Simply because -- the TA has been done - the entry decision has been made... so doIT - pull the damn trigger!
[btw - this is with one's eyes wide open too due to TA+experience+...+basic understing that your 'system/method' money/risk management works within accepted profit/loss boundaries for you]

Thinking may be cool - but in the end a trusted/understood plan must be followed to the letter it don't take any brains to do that... (after all - one has already done the mental stuff else would not be in position to consider an entry)
imho now it's simply understing[ accepting] that everything that could be done has been done [given one's current capabilities] including making an entry decision

trendfollower:
Your comments are most enlightening. As they say... I like the cut of your jib

btw would you be willing to be more specific regards:
1. timeframes
2. SL decision making: to include the where's 'n why's
3. Attitude towards using pricefib levels the stories cles can tell...
4. Have you heard/seen/used the 4hr or daily Tunnel Method?

Trends RULE just the finding of 'em that gives ya the frights

[trendfollower]

Hi Patrick
Refer to my previous correspondence by clicking on my profile. I trade off daily charts looking for change of trends in any of 19 different currency ps. a sread of 15 pips does not faze me. My indicators bollingersstarcrsi & stochastics must meet my criteria before entering a trade. With 19 different currency ps to choose I can afford to be fussy. I draw a support line on a daily chart with as many touch points as possible. If there are no touch points I look for them on a 4 hr chart. Then I tighten my support line on the 30 min chart & then draw in my resistance line & wait for the cle to hit my support line. The next cle in my chosen direction is my confirmation to enter the trade in the direction of the trend. My trades are normally 2-10 days long & will be happy to retrace 150 pips & get taken out on my stop loss. My stop loss is dependent on my current profitability with the other trades & where significant highs/lows were previously. Very rarely get taken out on a stop until I tighten it when I think the trend is over. Its a different mindsetlonger term trend multi currency p trading. Dont use Fibos or fundementals. On average the best time to enter a trade is just before EST. European sessions are often profit taking sessions before New York opens. I dont enter a trade when there are major fundamental announcements. Wait for the dust to settle first then wait for the cle to hit the support line. Don`t need to be glued to the computer. Great system for golfers. Getting in to a trade is the easy part. Not being greedy & staying in too long is the hard part. My average profit is 200 -300 pips per trade over 5 days. The secret is spreading your risk amongst different trades running concurrently. Single currency trading is like betting your money on even numbers in roulette.

[TrendsFX]

Originally Posted by patrick_fx

Hello traders

What would be a good method to determine a stop loss? I trade full NY time half Euro time. I trade short term hoping to catch 20 – 50 pips for each position. I’ve read some articles about the risk reward ratio like 1:3 1:2 etc. It never worked for me because if I target to gain 30 pips profit my SL would be -15 pips (1:2). Fifteen pips SL is too narrow for many ps (I trade the most major ps except JPY related ps). So I stop using SL. Things worked great for a few months then one bad trade took away most of my profit. :-( It made me realize that I need to find an effective SL. Please help.



Thank you
Patrick

Before me other fellow traders have explained the things in a very professional manners. So I just want to add one more tip to it;fficeffice" />>>

>>

For example at time of writing this post EUR/USD is at 1.2068/70 I am planning to SELL it only for 30/50pips. Okay this is my desire... now see it logically;>>

>>

I want to sell EUR/USD @ 1.2068 for 50pips (1.2018) right now. Where would my stop loss be?>>

>>

First of all market is low is 1.2033 it means 1.2025/30 KEY resistance has not been broken. If market closes at 1.2030/35 then there will be at least 70% chances for the EUR/USD to hit 1.2130 (or 1.2160) before it hits 1.2018.>>

>>

Regardless of how small profit I want this trade technical logical sensible stop loss would be around 1.2175. This will be 100pips away. For sake of 50pips in profit. Anything below 1.2175 will be a suicide attempt.>>

>>

It means this is not a proper time not a proper price to trade. >>

>>

RIGHT CHOICE: I should wait for at least day close. If it really happens to close at 1.2030 (almost) then I will LONG EUR/USD with stop loss @ 1.1980 (almost 15pips below resistance). That trade will have chances to give me 100pips or perhaps more.>>

>>

CONCLUSION: We need to wait for proper time proper price to trade. If we will do so our ‘stop losses hitting ratio’ will not be more than 25%.>>


*** Trade example is just an EXAMPLE to make things understable otherwise it's not a trade advice in any means.




TrendsFX

[Millowena]

Hi Folks!


Is there a way to get a look at attachments to previous posts?

Thanks!

Millowena

[TrendsFX]

Originally Posted by Millowena

Hi Folks!


Is there a way to get a look at attachments to previous posts?

Thanks!

Millowena

Wrong thread.. Anyway sorry I don't know they way to get a look at attachments to previous posts.

[patrick_fx]

TrendFollower thanks for sharing your techniques. Last Saturday was the first time I’ve heard about of Vegas’s Tunnel Method. I’ve read half of it just to get some ideas. How long have you been using VTM? How was the results?

My money management is quite simply. My contract size is 5% of my total margin. I usually having more than one position opening at the same time. I make sure that I have enough margin to withst draw down. I archive that by monitoring the Margin Percentage. Never let it go under 5.00

Here are the answers to your questions:
1. timeframes – I trade short term. The biggest profit I ever taken was 100 pips.
2. SL decision making – I barely use SL. Just read TrendsFX idea thinking about applying it.
3. I never used fib (do you really think it works?) but would be interested in learning cle stick pattern. I usually trade when the p is either overbought or oversold.
4. No. The only Tunnel Method I’ve seen was VTM that you mentioned. Htly how effective are they?

TrendsFX thanks for sharing a great idea! I never thought of it that way. Your idea will absolutely turn the risk reward ratio to the traders favor.

Millowena sorry I don’t know that either.