Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

6Oceans

Forex Trading: 4 Stop Loss Techniques

Recommended Posts

Since the stop loss subject is extensive, involving many other topics, I will discuss only the initial stop loss that is necessary to control the losses if the trade will not be successful. Let us now see the four best stop-loss techniques applicable to many different trading systems.

 

Stop based on volatility (Volatility Stop)

 

Imagine a market where the candles have a width of 120 pips. It makes sense to put a stop loss at 5 pips away from your point of entry? Unless your strategy is not a form of super-extreme scalping the answer is No. If you get into a certain direction you have to ask if you're giving the market time to develop in your favor, without which, insignificant fluctuations close down your position prematurely. On the other hand, one stop too distant, will lead to losses that you can hardly recover. Looking at the average volatility you can understand, therefore, where it makes sense to place the stop loss based on the breadth of recent market movements. Thanks to the ATR (Average True Range) indicator you can easily obtain the volatility of the last N bars. The value obtained will be the basis for choosing your stop.

 

Stop based on support and resistance

 

Another powerful way to set the initial stop loss is based on what is the reality of the graph. Markets will offer a wealth of information: the prices are clearly moving in one direction? The prices are moving wildly within a certain range? Through observation you can have a number of ideas to find a price level above which we have little hope that the trade turns in our favor in the short term, or not to proceed further against us by exposing them to excessive drawdown.

 

Stop based on indicators

 

Some traders, lovers of technical analysis, tend to base every aspect of their trading on the results offered by various indicators: list the various methods used would be impossible, so I will limit myself to one example. A fairly common technique is to enter and exit a trade based on the crossing of two moving averages.

 

Stop fixed to N pips

 

The stop loss is set at a certain number of pips from the opening portion of each position. This is an ordinary technique, where the distance is fixed and equal for each trade, such as 20 pips. You should exclude the idea of ??using a stop of this type since there are important gaps.

 

First, it disregards the fact that volatility varies over time and is never fixed. Generally, the shorter the timeframe used, the greater the possibility that the volatility changes.

 

Secondly, it is not connected to the reality of the markets: it does not consider resistance and support or other guidelines which may provide an assessment of the graph.

 

The only people who I think can use a fixed stops are experienced traders who intend to work with a very short term scalping technique, while maintaining a very tight stop loss.

Choosing an option or the other, would simplify what cannot be simplified. Every trading system, and each trade is a special case.

 

I have tried to provide meaningful tools to check your initial stop loss: making good use of them can greatly improve your trading.

Share this post


Link to post
Share on other sites
Guest muhitalam

There are many to stop loss. This article is really helpful. indicators is enough to stop loss? i want to know more about stop loss. share some more tips how to stop loss....

Share this post


Link to post
Share on other sites

placing stop loss is one biggest problem I have.

 

I enter a trade and after my stop loss is knocked out the market moves in the direction that my trade was placed for.

 

Bit frustrating.

 

Anybody has a better idea? what has worked best for you?

 

Pls discuss

 

thanks

Share this post


Link to post
Share on other sites

OFF TOPIC ie SwingTrading you probably should start your own thread...

 

 

 

I enter a trade and after my stop loss is knocked out the market moves in the direction that my trade was placed for.

 

Bit frustrating.

It’s system dependent…

one old ‘swing oriented’ trick for that particular issue is when you get setup and triggered then place entry limit order where you would have previously been placing the stop… another way, also system dependent in the particulars and varieties of its application, is to trail a stop up under (for a short) when a setup and trigger form instead of simply getting in… so that it's price movement in your favor that puts you in positions…

Again, all this is very system dependent... entries and stop techniques and placement

...

 

I enter a trade and after my stop loss is knocked out the market moves in the direction that my trade was placed for.

 

Bit frustrating.

“Learn” to ‘think in probabilities’…

Note: Use of the words “learn” and ‘think in probabilities’ is massive oversimplification / generality…

short labels that obfuscate far more than they explain…

the ‘thinking’ part is only one aspect of the whole process… and no explanations will ever take you closer to experiencing

( in my own 'sample of one' experience, preparation of the body precedes any possibility/capacity to authentically and consistently do the ‘think’ part…)

‘think in probabilities’ = you ready you to for multiple re-entries after being stopped out and none of them are one “bit frustrating”. *

 

I'd post some references and links...but, in this fkn place, it would get me banned...

 

 

 

 

 

 

 

 

 

"I did what I did for the good of the realm."

"The realm. Do you know what the realm is? It's the thousand blades of Aegon's enemies; a story we agreed to tell each other—over and over, 'til we forget that it's a lie."

"But what do we have left, once we abandon the lie? Chaos. A gaping pit waiting to swallow us all."

"Chaos isn't a pit. Chaos is a ladder. * ...Many who try to climb it fail; never get to try again.The fall breaks them. And some are given a chance to climb and they refuse. They cling to the realm. Or gods. Or love. Illusions. Only the latter is real. The climb is all there is."

—Baelish to Varys, Game Of Thrones; Season 3, Episode 6 (The Climb), @48:00

Edited by zdo

Share this post


Link to post
Share on other sites

i would prefer a fixed pips stop loss. a low pips, 20-30 pips stop loss. stop by volatile didnt really works with me, sometimes it's not easy to close negative pips at large amount, it would lead to unmanage emotion state, some traders refuse to stop their losing trader and put average order for safety, but the fact are the entry trade still overall negative.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Similar Content

    • By edakad
      Firebird is an indicator to identify the price spikes in the market. Firebird indicator first calculates a 10-period moving average, then shifts this moving average a certain percentage above and below the 10-period moving average. The shifted averages are drawn on chart as the red and green line. When price touches these lines, price spike is identified. Usually after a price spike, the trend reverses for some time. The indicator can be used to take advantage of this price behaviors. In daily chart usually the 10 period MA is shifted by 2 percent to form the price bands. On lower time frames like Hourly, Four Hour a smaller percentage price shift is used like 0.5% . The important consideration here is most of the price bars must be contained within the upper and lower bands.
      When price reaches above the upper red band, a sell position is opened. When price reaches the lower green band, buy position is opened. Trades can be managed with proper stop loss and take profit. In the picture, Firebird indicator is attached to daily chart of EUR/USD with 2% shift on MA. Note that almost all price bars are within the price bands. And when price extends beyond these bands, price trend reverses and comes back into the bands.

      FireBird.zip
    • By jason.lee
      How to reduce eroding Forex slippages? Slippage is more likely to occur in times of higher volatility (perhaps due to market events) and it makes a market order at a specific price impossible to execute. Such times are when large orders are executed, when market orders are used and when there is not enough interest at the desired price level to keep the expected trade price. 

       
      Slippage is neither negative or positive movements, it is simply the difference between the expected purchase price and actual executed price. Since the corresponding securities are bought and sold at the most favorable price available, an order can result differently. In this situation, most forex dealers will execute the trade at the next best price.  In forex world, the market prices changes fast and the slippage happens in times of delay between the order placed and its completion. 

       
      Slippage is the difference between the expected filled price of a trade and the actual price filled. In other words, when your trade is executed at a worse price than requested, so it is “slipping” from the original order price. It happens between the time that a trader enters the trade and the time the trade is made. It can happen to everyone in any given trading market; stock, currency, or commodity.

       
      This may be caused by an ineffective broker, increased liquidity and fast market. The forex market is very liquid and there are limited amounts of slippage.

      Share your Idea Please
      Thanks!
    • By jason.lee
      Does it mean that you are an expert just because you make a lot of profit? The amount of profit cannot be used to measure the value of a trader. Yes, you must be doing something right if you are making a frequent profit. However, that does not determine if you are an expert or not just by your profit. This is quite a common misunderstanding in the forex industry.
      Making a large profit is only one side of the forex market. Majority of forex traders tend to lose most of the time after they have experienced profit. But why?
      So many traders fall into a fantasy land where they make an endless amount of money at the beginning. Many beginner traders tend to gain profit at the start not knowing the importance of technical analysis of the market.
      The experts on the other hand who stayed became wealthy and stayed that way, continue gaining profit, are all knowledgeable when it comes to the basics. Experts have dialed many ways to control their minds to be set right to be a trader.
      Understanding of the market is a must know anyway. Expert traders wait patiently until the right opportunity comes. Opportunity comes to everyone.
      What differentiates the experts and the beginners is that experts know when the opportunity has come and knows to take advantage of it. Making profit by luck is possible, and yes luck is also very important. But can you profit with luck every time?
      How an expert trader is determined is not by how much the person gained, it’s about the precision and the frequency of results. Profit can’t be maintained by luck. It is maintained and is a result of precision and strategical execution. You shouldn’t worry because you’re not gaining any profit right now.
      You should be building your skill sets to be a better trader by experiencing many trading situations of losses and wins. If you invest in your time to improve, your results are guaranteed to increase more frequently and will become more stable.
    • By stefan066vr
      I'm looking for a reliable forex signal service (better with pending orders), with real and transparent results, I would be happy if someone answered me ... thanks
    • By FXTechstrategyT
      EURUSD: The pair looks to weaken further as it holds on to its downside pressure. On the upside, resistance comes in at 1.1600 level with a cut through here opening the door for more upside towards the 1.1650 level. Further up, resistance lies at the 1.1700 level where a break will expose the 1.1750 level. Conversely, support lies at the 1.1500 level where a violation will aim at the 1.1450 level. A break of here will aim at the 1.1400 level. Below here will open the door for more weakness towards the 1.1350. All in all, EURUSD faces further downside pressure

  • Topics

  • Posts

    • Very long time since I made last post. Thought about posting one chart. Stock name is masked intentionally as I am having position. My views may be biased. My way of viewing chart. Chart is self explanatory
    • Litecoin Price Prediction Today: Daily (LTC) Value Forecast – July 18   LTC/USD Medium-term Trend: Bearish ·         Resistance Levels: $100, $110, $120 ·         Support levels: $90, $80, $70 Yesterday, July 17, the price of Litecoin was in a bullish trend. On July 16, the downward correction ended at the price of $80 price level. The $80 support level was the previous low of April 11 and May 6. The support level is holding as the bulls made an upward move towards the EMAs. On the upside, if the bulls break above the 12-day EMA and the 26-day EMA, the crypto’s price will rise and retest the $140 overhead resistance level. However, the bulls are likely to face resistance at the $120 price level.The MACD line and the signal line are below the zero line which indicates a sell signal.     LTC/USD Short-term Trend: Bullish On the 1-hour chart, the LTC price is in a bullish trend. The 12-day EMA and the 26-day EMA are trending upward because the price has commenced an upward movement. On July 16, in the downtrend, the bears reached a low of $76 but pulled back above the $80 price level.   Yesterday, the bulls broke above the EMAs and commenced ranging below the $94 price level. Today the bulls have broken the $94 resistance level and  are approaching the high of $100.The MACD line and the signal line are above the zero line which indicates a buy signal.     The views and opinions expressed here do not reflect that of BitcoinExchangeGuide.com and do not constitute financial advice. Always do your own research.   Source: https://bitcoinexchangeguide.co
    • CRUDE OIL Corrective Pullback Mode Remains    CRUDE OIL corrective pullback mode remains as more decline is likely in the days ahead. Support lies at the 56.50 level where a break will expose the 56.00 level. A cut through here will set the stage for a run at the 55.50 level. Further down, support comes in at the 55.00 level. Its daily RSI is a bearish and pointing lower suggesting further weakness. On the upside, resistance resides at the 57.50 levels. Further out, resistance comes in at the 58.00 level. A break above here will aim at the 58.50 level and then the 59.00 level followed by the 59.50.00 level. All in all, CRUDE OIL remains biased to the downside nearer term on pullback.  
    • I had used binance and hotforex, first one for bitcoin to altcoins and the second one for EURUSD and they also added BTCUSD and BTCEUR pair too.
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.