Beginner Stop Loss

[ITtrader]

One issue that I have had is placing my stop loss. When I started just like everybody else in a demo account I was not scared to put my stop loss a 100 pips away. When trading the Demo account very rarely would I get stopped out and usually would turn a profit based on my strategies.

Once I switched to real money account I started to place my stop loss a lot closer to avoid the big loss. This proved to be ineffective as most of the trades I was making were great but I was just not giving it enough room.

As anyone else experienced this problem and how did you figure out where to put your stop loss so you don't screw yourself over?

[Breakout Doctor]

Originally Posted by ITtrader

One issue that I have had is placing my stop loss. When I started just like everybody else in a demo account I was not scared to put my stop loss a 100 pips away. When trading the Demo account very rarely would I get stopped out and usually would turn a profit based on my strategies.

Once I switched to real money account I started to place my stop loss a lot closer to avoid the big loss. This proved to be ineffective as most of the trades I was making were great but I was just not giving it enough room.

As anyone else experienced this problem and how did you figure out where to put your stop loss so you don't screw yourself over?

Most traders, especially the newcomers, like to use a fixed stop loss (like $50 or $100) because that's all they can "afford" to lose on each trade.

In reality, the market does not care about your budget, it will move where it is supposed to move, regardless of the position of your stop, end of story.

Studies show that the best place to place your stop is near a logical support or resistance level. But that requires a lot of experience in the art of chart reading.

[ITtrader]

Thank you for the advice. How much money do you think is necessary to be affective once opening a new account?

[Enivid]

That depends on how much you are planning to earn.

[ITtrader]

I would like try and make about $500 a month.

[Enivid]

Then you'll have to have a deposit of about $10,000 (depending on the leverage) to be able to control your risks effectively.

[ITtrader]

Wow, I was not thinking that much. If I start with $500 realistically do I have a chance to survive and build it up?

[Enivid]

Yes, but if you want to use a good risk management system (and you'll want to use it if you don't want to loose your whole $500 one day), the build-up process will be quite long.

[FL LOw]

Use some software.

I think it will help you.

Am I right?

Thanks

[DonnaMag]

Hey…. The stop-loss issue is keeping many traders busy, no matter if they are beginners or experienced traders. You are lucky because most of the traders are trying to keep the stop loss as far as possible from the entry point, which is obviously wrong and they delete their account quickly. You say that you think that the stop loss order is too close- that is great! You will "survive" longer than others will. Regarding your question, the answer is quite simple: if you buy a currency, set the stop loss order under the closest significant support. If you sell a currency, set the order above the closest significant resistance. Just make sure that the stop loss distance matches the leverage you use.