calculator

[guvvy]

Does anyone know where I can find a calculator which will tell me what price I need to put into MT4 to set as a stop?

e.g. If I am trading 0.01 lots (micro) and it's basically about ten pence a pip, I can afford a 200 pip stop loss (as this is about £20.00).

So is there a calculator which I can just put the info in and it will tell me what price I need to set the stop at.....

Thank you.

[FXAssassin]

Dude....that doesn't make sense. You're doing it backwards. First you figure out how many actual dollars you want to risk. Then you figure out where you want to put your stop loss. Put it wherever it belongs....where your system says to put it. Then adjust your position size so that if your stop loss is hit, you only loose the exact dollar amount you intended to risk up front.

Read my post here to learn how to do this and to get access to a calculator that will do it for you: Staying within the 1-2% risk per trade and leverage.

[guvvy]

I understand and thanks

This is the way I look at it:

£5000 account

using micro lots so that's basically 10 pence a pip. I will risk 1.5% of my account so that's £60.00 gbp so I am prepared to lose £20.00 per trade (30%) so isn't that 200 pips?

[Clint]

£5000 account

using micro lots so that's basically 10 pence a pip. I will risk 1.5% of my account so that's £60.00 gbp....

No, 1½% of £5000 is £75, not £60.

.....so I am prepared to lose £20.00 per trade (30%) so isn't that 200 pips?

None of this makes any sense.

If you have set your risk per trade at 1½% of your account balance, then your risk per trade is £75.

(1) After you have determined that 1½% risk is the right amount of risk for you, then the next step is to look for trade set-ups which meet the criteria of your trading strategy.

(2) When you find a promising set-up, you should evaluate two things: (1) its potential for profit, and (2) its potential to run the wrong way and cost you money. Generally, these evaluations are made by taking into consideration support and resistance levels, market structure, candlestick patterns, market flow, upcoming economic data releases, and other factors --- with support and resistance levels being, by far, the key factors.

(3) After you have determined logically where you should place a stop-loss to limit your potential risk, your next step is to decide whether you even want this trade. If the logical place for a stop-loss is 100 pips away from the current price, you might want to forego this trade, and look for something more promising.

On the other hand, if the logical place for a stop-loss is x-number of pips away from the current price, and if you are comfortable with that size stop-loss, then your next step is to calculate the correct position size which will match your stop-loss in pips to your pre-determined risk in pounds. For example, you might calculate that 30 micro-lots of the pair you are considering, together with a 25-pip stop-loss, will produce a trade-risk of £75 (which is the maximum you are willing to risk on any one trade).

(4) There is one other important step in analyzing a potential trade: You must compare the profit potential (in pips) of this trade to the risk of loss (in pips). If the ratio of these two pip-amounts does not meet your personal trade criteria, then this trade should be abandoned. Look for a better trade.

Your personal trade criteria might require a R:R ratio of 3:1, or 2:1, or some other ratio of Reward (TP) to Risk (SL). Whatever your trading plan requires --- that's what you must adhere to. Do not compromise your trade criteria in order to allow a questionable trade.

___________________________

The dumbest way to plan a trade is to set a stop-loss (SL) at some arbitrary level because that's how much you can afford to lose, and then set a take-profit (TP) at some arbitrary level because it provides the R:R ratio that you require. Don't trade that way.

[guvvy]

ok thank you. You didn't have to be so helpful yet you were and I really appreciate that.

I think the point I am trying to make is, I just can't figure out where to set my stops? If I am shorting do I set just above the next resistance line and vice versa?

[TyrannosaurusForex]

ok thank you. You didn't have to be so helpful yet you were and I really appreciate that.

I think the point I am trying to make is, I just can't figure out where to set my stops? If I am shorting do I set just above the next resistance line and vice versa?

Guvvy, the best advice I've heard about where to place your stop... put your stop at a spot where if it's hit, your trade idea is proven wrong.

So, for example, if you are going short, then place your stop above a recent high or resistance level that, if broken, will indicate that the trend or bias has shifted from short to long (or sideways) and your trade idea was probably wrong because price has now made a new "higher high."

[SimonTemplar]

ok thank you. You didn't have to be so helpful yet you were and I really appreciate that.

I think the point I am trying to make is, I just can't figure out where to set my stops? If I am shorting do I set just above the next resistance line and vice versa?

To be honest this is a tough question to ask on an open forum. Personally, I agree with TyrannosaurusForex's answer (directly above this post at time of writing), at least on the basis of that limited level of detail, but to be honest this is one of the most discretionary areas of trading, in my opinion. Stop placement can't really be dealt with as a standalone issue, as it is so wrapped up in the overall strategy. For instance, some people target an amazing R:R, but at the expense of tighter Stops which are hit more often. Others will leave a very wide Stop, hoping to ride any movements and fluctuations en route to a sensible target. There are many shades of opinion in between. Both of those extreme examples that I have cited, as well as many of the others options, can make very good returns, but only as long as they understand in detail why they are doing what they are doing and why it works for them over the long haul. Clearly a scalper needs very different Stops from a position trader, but it is more complex and subtle than that. Some people believe in stop hunting, and that they can defend against it, so take that into account, others simply place five pips above a high or low, others still do that plus spread, others place their Stop away from Entry by the number of pips covered by the entry bar, I have heard umpteen options. Most of them work in context, but it is the context that is the tricky part.

I am not meaning to knock, and I am not meaning to be defeatest or unhelpful, and you are asking a fair and common question. What I am simply trying to say is that there are an awful lot of conflicting and correct answers to this question, so as a starting point any specific answers you get here won't directly help in the way that you might want them to.

For instance, I often trade setups off the Daily chart, so my Stop is broadly 50-150 pips, but sometimes those setups cause me to look for a more efficient entry on a lower timeframe, at which point I drill down to that and might end up entering essentially the same trade for the same reasons but with a 22 (or whatever!) pip Stop and a much better R:R. But could I outline to you a list of the criteria I look for when deciding which trades suit that approach and which are best left on the Daily with a wider Stop? I'd struggle, and miss detail, because it is basically dependent on feel, instinct and experience as much as second nature rules. But that leaves me without one single answer on where I place my Stops - yet I am entirely consistent in their placement, in my own head. I might not be being clear - I'm slightly confusing myself lol - but I'm trying to illustrate that this is a subtle area, and punting your new trading vessel out into the market waters with too specific an idea - such as 'above recent high' - might just see you swamped by a load of factors that you missed in your analysis. Baby step ably assisted by BabyPips are the way to go!

Anyway, I hope you take this as constructive rather than critical, because I am not feeling at all critical, I asked similar questions early on. But my own opinion these days is that each of us needs to find the trading style that suits our own preferred style of trading/appetite for risk/stress etc., so detail questions about the nuts and bolts of a particular strategy are slightly putting the cart before the horse. There are various 'guru' threads on here - they each deal with Stop placement in the context of the particular trading style being discussed, perhaps skimming through a range of those will give you some idea what I mean.

ST

[guvvy]

Thank you so much. To be given such detailed advice is a blessing.

I will take it all on board. I think I am going to start with placing stops above nearest R and S lines depending on my position and see how that goes, I guess with time I will hopefully be as experienced as you all.