Hi guys,
I thought this video is a pretty interesting moment for any trader, as well as a reminder to everyone that the market is irrational.
I’d be sick…
Great stop loss lesson to share. Thanks!
You are welcome mate. I am glad you liked it.
Found out that the latest trend among trading mentors nowadays have been towards advising traders not to use stops, but in my opinion, stops at a reasonable price from the price of entry should be taken as a risk management strategy.
NEVER NEVER trade without a good stop loss!
Thanks for your reply.
I’m glad you liked it.
I thought the 2 videos, a funny (the first post), and a devastating (the lowest post) video, could really give us a really interesting lesson on stops.
I liked the hitler one though, never stopped laughing. But no matter, I’m glad you liked it.
The last 3 days of trading in the forex markets have indeed shown many traders how technological advancements in infocomm, has made many participants in the market to stay informed in real-time thus causing to move and switch moods in an even faster pace.
Traders should realize that lest they are not trading on leverage, a stop loss must always be in place on their trading strategy to prevent damage that could cause mayhem similar to the effect of the sub-prime loans, and further causing it to become a credit crisis, like what we have witnessed lately.
I do hope these videos could further bring thoughts to all fellow friends here.
Post in your comments. Always looking forward to them.
Cheers. 
The eye opener for me is how he keeps blaming the market for his account going down and down, rather than himself.
Hi Cordite,
I am glad the video has been useful to you.
On the flipside of this video, trading is also a challenging task if stops are placed too near your entry price, and especially when stops get triggered too frequently, as it may cause some serious damage to your trading equity.
So at what kind of levels would stops be considered appropriate?
In my opinion, this answer is dependent on the trader’s trading and risk management strategy, as it concerns the trader’s preferred trading time frame, and risk/reward preference.
A suggestion as I would propose to friends who would like to have a start at trading, that is to have a detailed writeup of a defined trading strategy (in point form) on an erasable white board, where it is constantly visible to you. The purpose of having the white-board, is to help the trader to help the trader constantly review, align, keep track, and define a strategy that will fit the trader. The white-board should be a very useful tool as traders tend to change and modify the characteristics of their strategies over time.
From there, think over where stops should be placed? My personal preference is to use a quantitative stop, where I would define a predetermined amount of loss per trade against my total equity, thus after that, I will define the number of pips that I would allow the market to move against me in order to take me out.
I hope this is helpful. Let’s bring this further. Cheers…
Hi grentone,
I usually proceed in the opposite way: my stop is determined from a purely technical standpoint, and then I calculate the size of the position to enter the trade. If the quantity (stop loss * position size) is less or equal to a certain percentage of my account size, I take the trade; else, I stand aside (or I take the trade on a demo account).
For example, suppose that I have a system for EURUSD where the stop loss is 2 times the ATR over the last 10 bars, the maximum risk per trade is 2% of the account size, and that I identify a potential trade. The ATR is 35 pips, meaning that my stop loss should be placed at a 70 pips distance from the entry. I then do the following calculation:
- for a position size of 10000, the risk is 70$
- if 70$ is not greater than 2% of the account size, take the trade
- if 70$ is greater than 2% of the account size, repeat the calculation with a position size of 5000
- continue reducing the position size until the risk is acceptable, or the position size is too small for the broker to accept the trade
There are indeed cases when I stand aside and I miss what would end being a good trade… I accept such occasions as the trade could very well turn negative and make me lose too much.
Hi quicksilver,
Thanks for sharing your idea.
Yes you are right, we are indeed taking the opposite approach, and they both work for the same reason. It does sound like a VAR approach in risk management. I have seen something close to this being used by some friends, and in my opinion, the risk management strategy seems like something that can work well on trading market swings, e.g 30min or 4hr.
So what are your trading time frames like?
I do exactly as you said, looks like you’ve been watching me trading behind my shoulders 
What I like to do is to establish a directional bias using the daily, 4hr and 1hr charts, and entering on the 30min on a pullback. The technique I’ve had the most success with is the shallow pullback outlined in the “Fib retracement trading” thread. I’ve had less success with the deep pullback technique, so I’ve set it aside for a moment and I will go back to demo trading it to better determine the high probability setups.
In my thread :
http://forums.babypips.com/newbie-island/10812-joy-candlestick-trading-learning-experience.html
[B]I use a totally different approach in setting stop losses.[/B]
Yes, stop losses are essential, I have always said that.
I advocate a [U]PCI stop loss[/U], that is power, computer or internet failure.
In this case, a failure of any of these may see a stop loss hit before repair can be effected, but at least, there is no margin call.
The setting of this PCI stop loss is dictated by the [U]candle pattern[/U].
As a rule, the stop loss is set 3 pips away from the extreme candle point in the pattern.
Multiple amounts are traded and, with one amount exited, the stop loss is then set to [U]break even[/U] for the 2nd amount.
This suffices for all intents and purposes and, using the 4 levels of strategies developed in the thread, [U]a positive risk/reward is set up[/U].
So sorry for this late reply.
quicksilver03, how was your progress over the week? And indeed, a good setup has to be determined first, then you start adjusting your stops to your strategic entries.
Additional to tymen1’s post, this indeed is also a good stop loss strategy, it works like a tom demark strategy, where the assumption is that, up-trend will have higher lows and down-trend has lower highs. May I know what is the time-frame that you would use for such a stop strategy?
By the way, I have added in some very interesting videos on the banking system in my site for the weekend, I hope all this would be of great help to all of us.
Thank you everyone for sharing your knowledge and suggestions here, I’m indeed learning greatly from you guys. Let’s keep this moving.
My last week? Zero real trades entered, zero profit and zero loss. I was ill at the beginning of the week, and when ill my trading plan says “don’t trade”, then in the second half of the week my broker increased their spreads beyond what I consider acceptable levels.
I did a couple of demo trades on USDCHF, one short with 49 pips SL and 62 pips TP that worked (but the risk-reward is not that good, I have to work on that) and another with 37 pips SL and 68 pips TP that was stopped out in last Friday’s buy mania.
Good to know that you are feeling better now, and indeed a great idea to stay away, when you are not on top form.
Today’s market is gonna get us all a little busy.
In addition, over the past few weeks where spreads were wider over most trading platforms, and markets were more volatile, I discovered by lengthening the time-frame of your entry (if you are using a triple screen method) chart, could greatly filter the noise(price distortion) created from a shorter time-frame chart (e.g to use 15min instead of 5min for entry).
wonder if this sounds logical to all ya guys.