Okay so when I first made my practice account i took a straight nose dive into 630 in losses. Over the past week and a half I’ve ranging between -620 and -570.
Today and yesterday I have decided on trading the overall pattern or trend with the 1day charts using fibonacci retracements. The stop losses I set were the same type of stop losses I set when I was trading using 15m, 1h, and 4h charts(i typically set a ~-17pip stop loss and an equal take profit). Should I loosen my stop loss to accommodate for the larger price movements that may occur? The trades I’ve been trying to execute playing off the 1day charts have been hitting their stop losses within a few hours.
I think using a stop loss to exit a trade at a loss is not the wisest approach and the wrong use of a SL, but that is just my opinion. Using a SL of 17 pips on a D1, or H4, H1 and even M30, makes no sense, at least not to me, and as was mentioned by David will get you on a nice track to lose most of the trades you place regardless if your analysis was right.
Add ATR to your charts, it will tell you the average movement of a candle over a given period. You want your stop-loss to be outside that as you don’t want to be stopped out by the general movement of the day. So it’ll the ATR for a daily candle is 100-pips then you want it to be outside that. A drop of 17-pips will get triggered with the general movement over 5-15mins let alone on the daily chart.
Once you’re more experienced, you can trade the daily charts but find your entry on a lower TF & that will help reduce your stop but err on the side of caution when learning & use a bigger one.
Regardless of your timeframe & everything else, a stop-loss is placed where price needs to move to in order to invalidate your initial trade idea/set-up.
If trading off a higher TF chart such as the Daily, then in my view Price tends to move in a series of cycles. It won’t simply be a straight line up or down, but is far more likely to move up in a series of waves, presenting on the chart almost as a series of humps and troughs as Price cycles up. So personally I would start with a pretty wide SL (intended purely to limit the risk to account capital) then look to bring the SL along behind my trade. So if am am going long, I just look in on the chart at the end of each day (I tend to check in on a trade in accordance with the TF) and bring the SL up to somewhere below the next dip up. Effectively this either reduces the Risk each day or - preferably! - locks in profit. I find that scaling my screen out to give me a very wide view often makes these peaks and troughs pretty obvious. If they aren’t, then I don’t want to be trading that chart…
Certainly I’d agree with the other poster that a 17 pip SL on a Daily chart is not something I would want to do. I do trade Intraday, too, off a five minute or an Hourly chart, and in either of those cases would look at 1:1 trades and a smaller SL (effectively risking 1% to make 1% - 20 pip SL, 20 pip Target). But not on the Daily!!
I hope that is clear, and makes some sense - I’m afraid I haven’t been on here on a while, so my chart-posting skills are a little rusty!
Stop losses are definitely good tool to protect you from big losses, but they can also kill your trades if you don’t use them properly. It is all about good risk management.
If you use fibonacci use it also to put your S\L . On youtube there is a great video of manesh patel using fib to place your S/L and T/P. Search on manesh patel and fibonacci and you find it.
It works great, i used it all the time , now i use it a little different but stil based on that video.
In your case I wouldn’t use any fixed amount of pips as a s/l since you are trading with Fibos as entries. Try to see the ranges in your timeframe and adapt your stop losses to that. Use fibo levels or Support and Ressitance instead.
Using stop loss is very important. It will save you from unnecessary loss that can happen in any trade. As there aren’t any sure shot setups in forex trading, all of trading is done on speculation so the use of stop loss is very important.
The stop is purely a Net to catch the free-fall trades and chaos. Keep in mind, the market makers know your using fibs, just by your placement, like ,ummmmm, IDK, 50% of the rest of the traders using them as opposite, so the market makers use FIbs ALSO to contradict your trades, setting you up for failure. Like Paull said, use them for entry points, and not exit points.