just want to share my view on stop losses. been trading around a year and when I first started I followed all the advice - make sure stop losses are in place to protect your capital etc so i did it by the book for the first few months. After a while I found was I was getting increasingly frustrated by losing money from going the wrong direction hitting my sl (which were at the minimum 20-30 pips away) to then look back in an hour for example and the trade has swung completely the other way. Now i tend to rarely use a stop loss as i try to trade no more than 10% of my capital and if i can see the trade is a huge disaster i force open a trade in the opposite direction and get a few pips out of it to help keep my funds topping up and then wait for the trade to swing back in the direction i originally opened it at, since then even though incur a few small long interest charges I very rarely lose money.
Anyway sorry for going on would just like to know if anyone else uses this approach? or if anyone can tell me if this is a seriously bad idea lol
Try to put your stop loss on a previous high or low and a higher time frame… That way you have a position “without” a stop loss to be hit right at once on the time frame you trade from…but still you have a “safety button” in the bigger picture in case it goes all bad.This gives your trade a little more space to play out and you know that in worst case scenario, you aren’t all out of the game and live to trade another day
when i first started forex trading, some good advice given was allowance of 60pips SL, i think it’s too little. sometimes, in a week, you got to let it thru for near 200pips before things take for a turn. nowadays, my strategy is 200 pips allowance and it also depend on the market situation which i take into consideration.
One good method is to add some number of pips to your stop loss from previous high/low or any other point you use to place your stop loss at. Last week check GBP/JPY daily chart, you will notice that 2nd pin bar has gone few pips below the 1st pin bar, then price moved up strongly. That additional pips to your stop loss can save you from such situation.
adding on, I use charts to get me in the position. if my trade goes against me, I will decipher the news and economics of the pair I am in. this will help greatly in your stop loss learning by looking for the next resistance or support, but just be flexible.
currently, I am stucked in EUR position cos’ I have been thinking they are in a mess but the pair went up 300pips against me, yes, 300 pips.i am holding till end of the month cos’ I amsure EUR will depreciate over time, how long it will take I am not sure.
I know some intra day traders trade daily and they will cut loss but in the long run, I find this method difficult to beat the market.
It is your choice to set stop loss or not. For new traders its practice is good . They can remain away from big loss. Stop loss is just a helping tool . It not prevents loss. It controls it on the pips which you had set. I mostly use stop loss in managed trading . With risky trading I skip to use stop loss.
Stop loss and take profit can be determined by volatility and then pinpointed with previous support and resistance or a tool like fibo. But playing without a stop loss is something that I wouldn’t recommed for those without enough experience.
What you’re doing by opening a new position in the opposite direction is often referred to as “hedging”. I put that word in quotes because I don’t mean the traditional financial definition of the term, but rather the way it has come to be known in retail forex. That’s holding simultaneous long and short positions in the same currency pair.
This “hedging” you’re doing isn’t actually causing you to “…get a few pips out of it…” You are, in effect, closing our your original trade. So long as you have both trades on - assuming they are the same size - your gains from the new trade are being totally offset by the losses suffered in the original trade. Your account value isn’t changing at all. It’s just like closing out the original trade. And when you close out the second trade - the “hedge” - it’s effectively the same as opening a new position in the same direction as the first one.
This is not a recommended approach. It may actually be costing you money. It certainly isn’t making you any. The idea that you “…very rarely lose money” is a performance illusion. Putting on these “hedges” masks the real performance of your directional exchange rate calls - potentially both good and bad.
I trade like this, but I mention I always have the trades for the opposite direction as entry orders.
Right now I placed the hedges at 120 and 200 pips away from initial entry. I am in red but I am not concerned at all.
In my opinion, any retail forex traders who imagine that this is a good and profitable idea, or even just a sensible way to obviate the need for stop-losses, should read Rhodytrader’s post at the bottom of the previous page.
