A Step by Step for everyone: Cut your Loses short

[angelnish]

I've been reading a lot of posts and some are too large or too numerical for me to read it, i guess most newbies do the same as me: skip the post. And hence i've decided to create a series of step by step threads starting with what i consider the most important thing in trading: To Limit your Loses. So I ask some help to explain and extend this issue and please be creative and try to avoid the same old stuff, i mean you must say it again but i ask you to explain your own experience.

Well this is sort of what I do to limit loses:

For start I am a mix of day and swing trader and for now i trade with Cable (GBPUSD for those who doesn't know) in 1hr charts. If posible i risk less than 1% and I've defined my SL level at 25 pips and TP upto 75 pips. Let's start with big picture and a little of sel experience: Skiping all the initial pain and the strategy to strategy stage i was making upto three trades per day with the scheeme mentioned above. Then I've noticed the loses were to painful and so i've reduced it to one trade per day and it was painful too. So after it I scaled it down to thre loses per week maximum and it was painful too. Dam! what i should do now? Ok, I changed to one loss per week an voialá, the best days of my life and then decided to stop trading once the monthly balance was reaching green numbers and start over next month. Well this adaptation took months to do because going from overtrading to just trading is not an easy thing to do, is just like smoking 1 pack of cigarrettes per day and then just smoking 1 per week. Analysing previous montly sheets I noticed something: the more I traded the more I was losing and the last months with fewer trades i was losing less and finally ended up with green numbers. But just trading less is not enough, I do something more, whenever I can I close orders manually before the price hits the SL, I mean, for me SL is a catastrophic exit when things goes out of control. My trading is based on the first minutes after opening the order, if price does not rise just a little in the next five minutes I just close the order and I try again next week.

So what you guys do for limiting loses?

 

[Enivid]

I clearly define my stop-loss before entering a trade. I trade medium/long-term chart patterns and choose the support/resistance levels (usually high/low of the breakout bar) for SL. Sometimes, when the target line is sloped, I move my SL in the direction of a trade.

 

[Easy Trader]

Any trading strategy in my mind has 3 phases to it in real time implemintation.
Looking over a strategy and trying to impliment it real time is where the disconnect often exists.....Just look over a MA cross strategy and then try to impliment it, the two are very different.
Each phase is built off of the previous, if there is a problem with the phase before the next phase will suffer or not exist at all.

Phase1- Full position is placed. Entry,SL,TP
The only thing a trader can do here is use good placment and correct MM nothing more. This is where a trader finds what risk profile they a comfortable with, If the trader can not take their eyes off screen, lossing hair and biting their finger nails to the bone then risk may be to high, or there is no confidence in the placement accuracy. SL should be the price at which the trader feels that the intital read of the market was wrong. While placing orders there must be a reason(s) why price will hit your TP and not your SL, like S/R between entry and stop. To try to utilize a static number of pips as a SL/TP accross all trades on a fluid market instrument seems silly to me, things just don't work that way from my experience.


Phase2- The first move
If the position is placed correctly the first move should contain some sembilance of momentum into profit, if this is not consistent trader needs to redefine phase1.
This is the first chance a trader has to make a smart decision (usually at a minor S/R area) via reducing stop size, take partial profit, or go to break even. There may be sub steps between phase2 and 3.
This is where losses are reduced or cut short. This is where the trader learns to correctly manage their particular system correctly.



Phase3 Move into maturity
The move into maturity is when the trader has correctly managed Phase1&2 and their medium/long term bias of the market is correct. Often even the best traders are wrong here but they consistently manage phase1&2 correctly which is where their success is earned.

If a trader cannot find a method to consistently 80% or better nail down phase1 and 2 then they don't stand a chance in this business in my opinion.

 

[dipurock]

A step by step for everyeone

The first step is to shift your focus to “What do I need to learn or how will I have to change myself to trade more successfully?" Stay focused on mastering the steps to achieving your goal.

 

[angelnish]

Trading without SL is not good, anything can happen.

 

[dipurock]

general discution

You will learn that the most successful traders restructure their beliefs about losses in foreign exchange currency after they lost one or more fortunes. After experiencing their worst fears about foreign exchange losses, they come to the realization that they had nothing to fear.

 

[Jungletrader]

I prefer a tight SL which although gets hit more often increase my RR thus leaves me more breathing space