Correct upshotsignlas. Time and time again I am not placing my stop loss far enough away. I trade on 4 hour and daily charts and with the amount of movement that can happen in a day I have not figured out how far to place it yet. It does not help that I have a small bankroll.
Beginner Stop Loss
- Thread starter ITtrader
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Here are a few things I tried as I was in the same situation about 10 years ago.
I first of all figured out what time frame I wanted to trade because that told me how much time I was going to need to trade each day.
You have that figured out already, (I also use the 4 hour and Daily charts for my swing trading method)
Once I determined what time frame. I started looking for the technical trade setups and how often they occurred.
I literally setup a video camera in front of my screen and recorded my results.
I moved one candle at a time on the time frame I chose and looked for the technical set up pattern,
once I found the candle that provided the signal, I recorded on paper and video the entry price. Then I continued to move each candle until it became profitable.
At first, I wasn't sure how long to hold the trade but after a few weeks of doing this, I started to see a pattern that repeated based on the technical setup, (example, a break out technique usually resulted in more profits than a re- entry in a trending market)
By testing and using this process, I got pretty good at determining how long to hold a trade open. this definitely included price on the chart not the length of time.
I also considered the average ranges that the pair travels in.
This may seem a bit confusing but if you just pick a starting point to begin the process, it will work itself out through your analysis and testing.
if you want more tips how I put this testing method together and details, let me know I am happy to share
I first of all figured out what time frame I wanted to trade because that told me how much time I was going to need to trade each day.
You have that figured out already, (I also use the 4 hour and Daily charts for my swing trading method)
Once I determined what time frame. I started looking for the technical trade setups and how often they occurred.
I literally setup a video camera in front of my screen and recorded my results.
I moved one candle at a time on the time frame I chose and looked for the technical set up pattern,
once I found the candle that provided the signal, I recorded on paper and video the entry price. Then I continued to move each candle until it became profitable.
At first, I wasn't sure how long to hold the trade but after a few weeks of doing this, I started to see a pattern that repeated based on the technical setup, (example, a break out technique usually resulted in more profits than a re- entry in a trending market)
By testing and using this process, I got pretty good at determining how long to hold a trade open. this definitely included price on the chart not the length of time.
I also considered the average ranges that the pair travels in.
This may seem a bit confusing but if you just pick a starting point to begin the process, it will work itself out through your analysis and testing.
if you want more tips how I put this testing method together and details, let me know I am happy to share
I would enjoy learning more. I don't think I will go to the extent of video taping my computer but if you can give more insight it would be appreciated.
I am at the point of still learning where support and resistance are and how to use that for the breakout trades.
I am at the point of still learning where support and resistance are and how to use that for the breakout trades.
Support and resistance have definitive rules but learning how to identify the most "significant" levels takes practice. I believed that learning it was a matter of "pattern recognition" because in the beginning, I could see the patterns after they appeared and the price moves were predictable. The trick was in learning how to identify the support and resistance as it was developing so I could make a trade decision.
The videos helped me a lot because I would watch them while trading, at night instead of watching television shows, on the computer... I just kept watching the patterns over and over.
The videos I made began by moving one candle at a time. MT4 has a EA for this. I believe its called "Vhands Simulator" you can Google it and probably find it on a Forex Forum with instructions.
(I am not sure if I am allowed to post or attach ea files here)
Any way,
there were many mistakes in the beginning but by watching the patterns over and over I started to formulate my own rules.
Example: the first technique I developed was a "break out trade" and I found that the "pattern" would develop on all time frames.
I started with a time frame that suited me best and created rules around the break out trade and I recorded the results. If the rule didn't work, I tweaked it until it started to work.
This all took many, many months. But the important thing is to never give up.
Support and resistance comes in many forms.
Fib retracements,
Pivot points,
Psychological levels,
trend lines... etc....
It was easiest for me to identify the most "significant levels" starting off with consolidation ranges which create the "break out trade"
of course indicators such as Bollinger Bands help too but I think its very important to see the price action clearly first so there is no mistake when you look at a chart.
The videos helped me a lot because I would watch them while trading, at night instead of watching television shows, on the computer... I just kept watching the patterns over and over.
The videos I made began by moving one candle at a time. MT4 has a EA for this. I believe its called "Vhands Simulator" you can Google it and probably find it on a Forex Forum with instructions.
(I am not sure if I am allowed to post or attach ea files here)
Any way,
there were many mistakes in the beginning but by watching the patterns over and over I started to formulate my own rules.
Example: the first technique I developed was a "break out trade" and I found that the "pattern" would develop on all time frames.
I started with a time frame that suited me best and created rules around the break out trade and I recorded the results. If the rule didn't work, I tweaked it until it started to work.
This all took many, many months. But the important thing is to never give up.
Support and resistance comes in many forms.
Fib retracements,
Pivot points,
Psychological levels,
trend lines... etc....
It was easiest for me to identify the most "significant levels" starting off with consolidation ranges which create the "break out trade"
of course indicators such as Bollinger Bands help too but I think its very important to see the price action clearly first so there is no mistake when you look at a chart.
"Price Action"?
If I am thinking about it in the same terms you are, many consider looking at price action to be a chart without any kind of indicators.
I believe the real reason is that relying on indicators can sometimes provide a false sense of security. Meaning that traders will often look at the patterns or signals in the indicator to confirm the trade without considering what price is really doing.
Sometimes we can see a possible trade signal and the "indicators" will confirm, but that doesn't always mean a valid trade. We have to consider whether price is relatively high or low at the time of the signal and if its likely to continue to move.
Ever notice how sometimes you get a valid signal, the indicators confirm and then you enter a trade and it only moves a few pips and then stops?
Afterwards you realize you just got in long at the top or short at the bottom and the whole trade turns against you.
This usually happens because traders fail to identify where price "has come from" and if there were any prior trades before the one they find that fails.
Meaning that they probably got in at the end of a move and they ultimately missed the trade that set up before.
Removing indicators and looking only at price... you really have no choice to identify support and resistance and trend, in order to find a trade.
This is a very good place to start.
But keep in mind that using popular indicators with the right settings for the time frame you prefer, can provide more trading opportunities for "other" types of trades like scalping and techniques for trading inside consolidation.
It's argued that the reason indicators work is that a many traders see the same thing at the same time and expect the same thing to happen and they react.
A self fulfilling prophecy.
If I missed your thought on the topic of Price Action, please let me know.
-Irishtrader
If I am thinking about it in the same terms you are, many consider looking at price action to be a chart without any kind of indicators.
I believe the real reason is that relying on indicators can sometimes provide a false sense of security. Meaning that traders will often look at the patterns or signals in the indicator to confirm the trade without considering what price is really doing.
Sometimes we can see a possible trade signal and the "indicators" will confirm, but that doesn't always mean a valid trade. We have to consider whether price is relatively high or low at the time of the signal and if its likely to continue to move.
Ever notice how sometimes you get a valid signal, the indicators confirm and then you enter a trade and it only moves a few pips and then stops?
Afterwards you realize you just got in long at the top or short at the bottom and the whole trade turns against you.
This usually happens because traders fail to identify where price "has come from" and if there were any prior trades before the one they find that fails.
Meaning that they probably got in at the end of a move and they ultimately missed the trade that set up before.
Removing indicators and looking only at price... you really have no choice to identify support and resistance and trend, in order to find a trade.
This is a very good place to start.
But keep in mind that using popular indicators with the right settings for the time frame you prefer, can provide more trading opportunities for "other" types of trades like scalping and techniques for trading inside consolidation.
It's argued that the reason indicators work is that a many traders see the same thing at the same time and expect the same thing to happen and they react.
A self fulfilling prophecy.
If I missed your thought on the topic of Price Action, please let me know.
-Irishtrader
A stop loss should never be a definitive amount of pips for every trade, they should be placed according to that particular trades expected movement.
The exact same goes for take profits, currencies are much more inclined to follow previous highs, lows, fibonacci retracements, etc than they are YOUR stop loss and take profit.
I recently wrote an article on placing an effective stop loss and take profit, see my website in my signature if you'd like a read
Happy trading, Lee J Brown
The exact same goes for take profits, currencies are much more inclined to follow previous highs, lows, fibonacci retracements, etc than they are YOUR stop loss and take profit.
I recently wrote an article on placing an effective stop loss and take profit, see my website in my signature if you'd like a read
Happy trading, Lee J Brown
proper risk managment and stop placement.
5000.00$ account @ 2% risk per trade
2% of 5000.00$=100$
trade1- desired stop is 30 pips negative
100$/30pips=3.33$ per pip
lots @ .10=30 lots
trade2- desired stop is 100 pips negative
100$/100pips=1.00$ per pip
lots @ .10=1lot
i place 'obvious' support/resistance between stop and entry. If it ends up being a penny per pip than so be it.
5000.00$ account @ 2% risk per trade
2% of 5000.00$=100$
trade1- desired stop is 30 pips negative
100$/30pips=3.33$ per pip
lots @ .10=30 lots
trade2- desired stop is 100 pips negative
100$/100pips=1.00$ per pip
lots @ .10=1lot
i place 'obvious' support/resistance between stop and entry. If it ends up being a penny per pip than so be it.
Yes risk management system's process is long and require careful planning and study.
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