What is the best Stop Loss you set?

[davidtst]

Hello FX Trader,

As daily fx trader, what do you think the best stop loss you should set?

or

What do you the best profit target you should set?

I set my stop loss 50 pips or 80 pips away from my extry.

I would like to hear some expert opinion here.

David

[fx-aussie]

I set mine 12 pips plus the spread from my entry... so obviously it depends on your trade duration. I only expect to get about 20 pips on average per trade net.
With 80% winning trades to losers it works for me. I have about 5 - 6 trades a day.

[MickMason]

I think between 30 and 50 is about the average for intraday, I guess it depends on your strategy though. Intraday targets I suppose 50 or 70 on average, those are the risk:reward my trades are mainly based on anyway.

Mick

[hagadol]

This is strategy dependant.

I trade intraday Cable, using a stop of between 8 and 15 depending on how tight my entry is to a previous support or resistance levels. My plan is to place the stop in a value zone where there is more probability of it being safe than being hit. In otherwords, the stop is placed in an area where price has not been in recent trading.

[ukt]

Hello davidtst

I have a system but like you am still questioning my stop placement ideas...

Like hagadol I've been using Sup/Res areas to.
But day trades only. Having identified trend reversal (with confirmation candle[s]) I'll place stop at recent HH/LL area.
This can lead to at least 1 days trade range in some cases, but if you've got it right - the stop will never be touched and of course you can always move it intraday for break even/profit taking - but that kinda defeats the day trading idea.

I only use trend lines and fibs + candles and the tales they can tell...sometimes

Cheers

[Coral Shores]

Originally Posted by davidtst

Hello FX Trader,

As daily fx trader, what do you think the best stop loss you should set?

or

What do you the best profit target you should set?

I set my stop loss 50 pips or 80 pips away from my extry.

I would like to hear some expert opinion here.

David

I would never suggest you select a target or stop loss of XXX or YYY consistently.

To determine what stop loss or take profit to use you should consider support and resistance levels or the parameters of the pattern you are trading.

I am sorry I can not be clearer but there is no cut and dry answer but I can give you examples that may be helpful.

If I take a trade at 1940 (just making this up) because my internal system says that is support I have to ask myself if that fails is there a close logical secondary support? If so then my stop if placed below that support. If there is no close secondary support I ask myself what is my target for this trade? I then make my stop close to or less than that target.

When setting your target ask yourself where would you consider going short if this is a long trade? Where do you see resistance above?

The key really is to stay away from constantly using SL 20, Tp 40, etc. Instead set them based on your analysis of the market. To do so shows you did your homework and forces you to analyze the current market context.

Some examples that may help is my system is short term in nature and stops end up being around 9-12 pips on average.

Another professional trader that I know holds trades over several days and places his stops outside the ATR (average true range) - that will put it about 80-90 pips out on eur/usd.

[Coral Shores]

Originally Posted by Coral Shores

I would never suggest you select a target or stop loss of XXX or YYY consistently.

To determine what stop loss or take profit to use you should consider support and resistance levels or the parameters of the pattern you are trading.

I am sorry I can not be clearer but there is no cut and dry answer but I can give you examples that may be helpful.

If I take a trade at 1940 (just making this up) because my internal system says that is support I have to ask myself if that fails is there a close logical secondary support? If so then my stop if placed below that support. If there is no close secondary support I ask myself what is my target for this trade? I then make my stop close to or less than that target.

When setting your target ask yourself where would you consider going short if this is a long trade? Where do you see resistance above?

The key really is to stay away from constantly using SL 20, Tp 40, etc. Instead set them based on your analysis of the market. To do so shows you did your homework and forces you to analyze the current market context.

Some examples that may help is my system is short term in nature and stops end up being around 9-12 pips on average.

Another professional trader that I know holds trades over several days and places his stops outside the ATR (average true range) - that will put it about 80-90 pips out on eur/usd.

If you are interetested here is an example of stop placement on a trade I took. I actually consider this something of failure but it illustratest the point better than one of those spiffy charts where everything lines up exactly (not going to happen in real life).

The upper aqua line is where my research flagged an entry for a scalp trade and where I went long.

As you can see I was wrong.

The second aqua line (the lower one) is where my research flagged a second possible entry. I considered my profit target and decided this would be a good place to put my stop (under the second line). As you can see the first entry turned out to be valid in a sense because the subsequent bounce hit that line exactly - maybe dumb luck. But, I was wrong on my entry at first but had logical stop placement to get me out at around 6 pips + spread if I was wrong.

This trade actually got thrown into the research bin to determine why the first entry was off but then acted as support for the bounce. Research of your failed trades is something I would really recommend even though it is so boring.

WARNING. One trap I see people fall into is after researching their failed trades their solution is many times to simply adjust TP or SL levels on the next trade. Adjusting your SL or TP levels based on a failed trade without any understanding of why those selected levels failed is little better than running a backtest and changing those levels until you get the results you want - a result that then of course fails in the future because it was no solution to being with.

[waverider]

I take the current bar and apply a 10 period atr multiplied by 3.25 and place stop that distance from bar close. Then follow if price makes new high, will keep stop beyond the noise in most cases. In my opinion stops should be based on market conditions. Tharp's "Trade your way to financial freedom" introduces some interesting ideas about stops.

Actually has anyone written an indicator that will allow you to place this line on the chart without having to calculate it each time? The factor in which the atr is mulitplied by should ideally be adjustable as 3.25 may not suit some peoples risk appettite