Establishing stop/loss points

Hi!

I have finally made up my mind and took the urge to discuss with you guys about stop loss and take profit points.

Personally i have been looking this forum’s free forex trading systems part, and found out, most of the indicators are not helping me at all, i found out i can make most of the money on the hourly chart, trying to find channels, trends, and possible resistance/support lines.

The problem with this, most of the time i dont know when exactly to leave the trade. As for a stop loss, i can say my stop loss is below the trendline that acts as a support, but what about my take profit?

I have read everywhere to let my winners ride generating more profit, but most of the time, if i let them ride, i get into a situation of losing my profits, with the price turning against me.

I can of course use trailing stop losses, but since i have to give the price space to oscillate, those stops most of the time let me walk away with about 0.1 part of my max would be profit, before the price turned against me.

So how do you guys establish those points? Would you recommend me doing the above trailing stop method?

Everything you say there makes good sense to me.

There’s no universal “right answer” to this question: it depends on [I]many, many[/I] factors and what’s best for one person may not be, for another.

People vary [I][U]greatly[/U][/I] regarding the extent that “fear of loss” and “fear of missing out” motivate them and influence their trade management decisions.

(For myself, I compromise between two objectives: I close [I]part(s)[/I] of the trade with a fixed but volatility-related target (or two), and let the lest run (if it will). The precise method I use took an enormous amount of testing (both back-testing and forward testing) to arrive at, and it varies according to the entry-type I’ve used. There’s no reason to imagine that my precise method is going to be relevant to anyone else.

Personally, I would recommend that you [U]avoid[/U] it - sorry! - and I’ve said more about why here.

Sorry to have written a few paragraphs here without actually helping you very much. The bottom line is that you have to experiment and see what works well for you, according to your own trading. :8:

Please don’t expect more, be logical not emotional! I personally use intraday support and resistant levels to leave a trade position, even I use same strategy for take profit trading tool! I count mainly intraday support/resistant levels according to the daily trading chart only, lower time frames are not reliable to predict valid support and resistant point, so you can use this strategy! On the other hand, I am not use to with trailing stop trading tool;

Thank you, I think that too.

Thank you, I think that too.[/QUOTE]

I respectfully disagree: lower time-frames are not reliable enough to use their S/R levels for trading in higher time-frames, but they can be for trading within their own time-frame (and my bank manager agrees :wink: ).

Well, within their own context they should do very well - i.e. intra-day. But in any debate as to which to use, the trades must be multi-day, or the question as to whether to use intra-day levels or daily levels as S/R wouldn’t make sense. Sorry, I had to assume Jonathan Makins was on my multi-day wavelength but now I think about it, maybe both he and I at crossed purposes.

I gotta give you that, if you plan your trade with care, you are not supposed to use trailing stops. Yesterday i would have hit my TP line, but instead, i hit the trailing stop. :mad:

This is the problem with trailing stops, surprisingly often, I think: it’s very easy to lose count of the times a trade starts off doing well and then retraces a bit (just enough to take out the trailing stop, which has of course moved during the initial phase of the trade), before continuing on its merry way in the “right direction”.

Quite often, also, the times that trailing stops actually cost you money tend to be “opportunity cost” money - in other words, you make a bit less (or a lot less) than you might have done without the trailing stop, in a trade that was still profitable anyway: people often don’t “notice” this fairly common eventuality as much as they perhaps would if they were looking at [I]actual[/I] losses.

Seems like my method did not work today.




I was trying to trade these setups, with the price hitting the edge, and trying to trade with the direction of the overall trend, but i lost 2 of them already, and i have 1 running.

Questing might be too indiscrete but would you mind giving me any input where i might be wrong with these? Or is it just that i cant be always winner with trades like this?

I think that it’s probably mostly that you can’t [I]always[/I] be a winner with trades like this (or indeed with any other kind of trades).

I don’t agree, however, with all the positions of the lines you’ve drawn: in my opinion, it’s a mistake, when using candlestick charts, to draw lines connecting the bodies of the candles rather than the ends of their wicks. The bodies of the candles display only opens and closes, which are inherently subjective and user-defined; the ends of the wicks, in contrast, display highs and lows, which are objective and factual. This relates to why I prefer, myself, to trade from bars rather than from candles. Both display the same information, of course: the open, high, low and close of each period … but bars visually emphasise the highs and lows rather than the open and closes, and in my experience that’s easier, more realistic and more helpful.

(I’m not for a moment suggesting that the specific trades you illustrate above would necessarily have worked out better for you if your trendlines used the wick-ends.)

I totally see you point.

Even though yes, i need a way to somehow exclude trade opportunities like this, maybe an indicator to have a better chance that the price will stay inside the channel. Only problem is i did not find any indicators to this as for now… :frowning:

Trailling stop has saved me more than once. but it should be used only when the deal closes in the profit.

A good stop technique (on a long) would be one which exits you from the position when the probability of price increase falls to an unacceptable ratio. But without looking at the TA in the case, it is impossible to say whether this simple rule is being respected by the stop order. If its impossible to say whether the stop being activated is good or bad, then it is random. Can it ever be a good idea to allow a trade to be closed at a random level?

You have to create your own strategy and the money management plays significant role for having successful trades. Personally, I would suggest to create trades with 3:1 or 2:1 risk to reward. For example if you place a trade for 30 pips profit the stop loss must be 10 pips only.