We have already found out that it can be quite dangerous to trade without
- Support/resistance levels are quite popular both for position entry and for exit.
Stop-lossesset near such levels usually are quite safe. Unfortunately, they can be abused by institutional Forex market participants who tend to push market to support/resistance levels to catch a wave of triggering stop-losses.
- Round numbers serve as the psychological levels of support and resistance and thus are quite similar to those
- Fibonacci retracements offer good signals both for
profit-takingand loss-stopping. Important Fibonacci levels are .382, .5 and .618.
- Set levels from the open price is a very popular type of
stop-lossin expert advisors, where stop-lossis set to the entry level with a fixed amount of pips added or subtracted from it. Unfortunately, such stop-lossisn’t adaptable to the current market situation.
- Indicator values can serve as viable
stop-losstargets, but the quality of such stop-lossdepends on the quality of indicator. Parabolic SAR is the classical example indicator that’s perfect for stop-losssetting.
- Levels based on volatility (ATR) are the most adaptable
stop-lossvariant. At the same time, it’s the most difficult-to-usemethod unless you are automating your trading. Volatility based stop-losschanges depending on the current market liquidity and ability to go for long pips.
- Gann levels may be derived from Gann fan, lines or grid. Gann was a nice trader, but you actually have to believe in his theories to trade using his principle of technical analysis.
- Pivot points are popular, but too many of pivot point types exist. And the produced
stop-losslevels are based more on math than on the market situation.
- Channels can be regression channels, channels built with trendlines, channels based on trading sessions, etc. Work good, if you know how to build those channels.
- Random is a way to set up your
stop-losslevels when you have no time for your regular analysis but urgently need a position with a stop-losslevel. Of course, you can develop a system with random stop-losses, but how successful will it be?
If you want to share your opinion or questions regarding the best way to set your