Stop Loss

[Rob & Von]

Hi all

I would appreciate your thought on the following:

The last seven trades I have done have all been loosing trades due to my stop loss not being big enough - in my trading plan I decided that I would keep my stop low i.e. 30 plus spread for any trade. I am finding that all seven trades if they had a bigger stops they would have been winning trades. My question is:

When first entering a position should you place a mechanical stop such as previous days high/low depending on the trend or stick to short stops which have no bearing on support/resistance etc.

Von

[Fire580]

I have always felt that traders placing stops at 20 - 30 - 40 pips with no technical reasoning was a mistake. I always check everything within range of such an entry for the most significant "stop" area..... fibs.,previous market structure highs and lows, as well as trend lines are im my opinion the most important.
In reality I do this BEFORE entering the trade - and sometimes have to let an otherwise good entry go by due to a realistic stop being too far away. That's the name of the game in my opinion entering at the right level with a reasonal stop - you'd be surprised how many of the big chart traders have much more reasonable stops then the little guys think (because they enter at the right time)

[eternalfuture]

Rob & Von,

Usually, I don't set the stop based on number of pips. But, instead, I define my stop based on my analysis, on what I look on the charts.

If I go long, I look for a price level that I believe can alter the bullish tone into bearish tone. And if I short, I would look for a price level that I believe can reverse the bearish tone into bullish one.

In the end, I would have my trade plan, which consists of entry and exits (target and stop). Then I take a look at it again. If I believe the stop is too big for me and my account to handle, I'd skip the plan and look for other opportunities.

If I set it up based on pips, let's say I want to buy usd/jpy at 110.10, targeting 110.90. I could set the stop at 30 pips (pips based), thus at 109.80. But it could be at that point, the critical point would be at 109.75, so I should've set it at 5 pips lower, instead of 109.80. According to the analysis, it's ok for the pair to pull back as far as 109.80, but below that, it's not good anymore. So, setting the stop at 109.80 would result in it getting hit because it's not a critical point. Yet it could escape the pullback up to 109.80 if you set it up at 109.75.

As for how to find the critical points via analysis... well that's another story. It would depend on your analysis technique.

Hope this helps.

Good luck!

[RBT1262]

I base most of my trades, Long or Short, on what's called a 1-2-3 pattern. The trade is triggered off the #2 point.

When I place a trade off of this pattern I immediately place my S/L just below the #3 point.

The idea of a 1-2-3 pattern is based on traders habits. So if the #3 is taken out then it's a pretty good chance that I'm on the wrong side of the trade and I want out.

Quite often this pattern will form at the end of an up or down trend.

This pattern also shows up on minute charts. I use the 15' for trading and an excellent one appeared on the EUR/USD yesterday, 11/18, just before the spike up.

Good trading to all.
Dick...

[PanMarcepan]

Von,

When you set 30 pip stop, what was your target?

[Jam]

When I trade high probabililty setups I place tight stops (30 pips for instance) Usually they are never hit. In the event that they are then my original premise and analysis was incorrect to start with.

[Rob & Von]

Hi Jam (stranger)

I cannot answer your question as I cannot remember what I said last year regarding stops. It really depends if you are trading long trades or short trades. If you are working off the daily chart you should be looking at bigger stops such as support/resistance if you are working off the hourly you should keep your stops short

Let me know what your actual question is and I will endeavour to help you.

Von

[Jam]

Actually I wasnt asking a question, I was just stating how I determine my stops...By the way how have you traded since the last time you started this thread?