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]

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.

 

[ITtrader]

Thank you for the great advice. By any chance could you post a chart and show me a good example?

 

[pipeasytrader]

Ive always made it a rule to put stoploss 30 pips above or below the previous high/low

 

[bathu]

i think stop loss is more than take profit,,, thats y the closing order become more chance for profit in the market..

 

[bathu]

hi ITTrader, i think the stop loss may be 30% and the take profit be 20%.. for better trade i think..

 

[SunbirdChief]

This problem is pretty common among most of the traders. Many things that we do in a demo account are often impossible for us to do in a live account, because of the human nature. Regarding where to put the stop loss orders, I guess that you use technical analysis, so you should determine the stop according to the technical analysis principles. Meaning that you have to find significant supports or resistances (depends whether you open a short/long position) and set the order under/above it. If you find that the stop is too far for you than you can either skip this trade or just open a smaller position. Anyways, you should not let the stop stress you out, otherwise you would not be able to manage the trade appropriately and you lose your money.

 

[ITtrader]

Do any of you use bolinger bands? If so one setup that I know is the over extended setup. If price gets over extended on the bolinger band odds are that it will come off off the band. So when price is over extended like on chart below which is current AUDUSD which I am short because of the setup where do you put stop loss? There is really no resistance if I am understanding it right.

 

[1only]

To limit your risk, you must set your risk % per trade and how many pips for your stop to determine your trade size.

Your trade size (mini lot) = account balance or equity x risk % / pips for your stop.

For example, I always risk 2% per trade and my SL is always 15 pips and my current account balance is $106,404.

My trade size = $106, 404 x 2% / 15 pips = 141.8 mini lots.

If you have only $500, you can still trade well with trade size = $500 x 2% / 100 pips (per your post) = 0.1 mini lot. You just need to find a broker for micro lots.

I hope this helps.

 

[CortneyWilliams]

Placing Stop Loss orders is an art form and there are considerations to be made. One is where to place it, perhaps at the level in which the trader first entered into the trade. Traders might prefer a trailing stop loss to protect a profitable trade. The trailing stop could be used as the trade makes money. Entering new orders and canceling the old order at the same time makes this a trailing stop. This can also be used as a way to further protect a profitable trade by closing up the current price level and the stop order price. Eventually the order will be triggered, but the profit may be greater than just getting out of the trade by feel. As with all trading, the idea is to use as little risk as possible and still give the trade some breathing room.

 

[mybaby]

Advice taken! Thanks!

 

[upshotsignals]

and the stop loss placement should match the time frame you are using.