Hi guys, i am having a serious problem determining if to use a sell/bus stop or not.
My strategy involve trading the trend and it goes like this:
If after my analysis, the market is then going against me I will place a buy or sell stop at the opening price so that my trade is only executed if the market start going in my direction.
The problem with this strategy is that sometimes I feel that a buy/sell stop is invalid since my stop can be triggered and immediately move back to the opposite direction, I feel that the direction the currently candle stick shows does not matter since a pair can be bullish on a one hour chart and bearish on a 4 or 3hours chart.
I think that after analysing the likely direction of the trend for the day, one should immediately place a trade even though the current market direction is saying otherwise.
I actually do that. Sometimes, i get a heavy drawdown and, adopt averaging to mitigate my risk.
Nonetheless, i think Sell/Buy stop orders are still relevant. Breakout of STRONG resistance and support level, are usually more or less accurate. That is, if your initial trend determination is correct, it wouldn’t be wrong to set a sell/buy stop order and to have it triggered upon breakout.
In any case, what you say above is no more or less true of buy/sell-stop orders than it is of any other order-type.
If you were to do a poll of people making their livings by trading (including forex) I think you’d find that at least three quarters of them are entering positions exclusively by buy/sell-stop and never using market entry orders at all. It’s only an unprovable personal opinion, but there it is.
Then you’ve misunderstood, at a very fundamental level, how trade entry-orders work.
Not trying to be rude to you, but your thinking is seriously out of step with that of the great majority of successful traders on this point.
It’s not easy to know what else to say to you, or to make helpful suggestions to you, without a real understanding of why, at the moment, you believe something that’s so clearly mistaken, howe your current belief-set has been formed, where you formed this impression, and so on. Sorry.
Eddie, I think the OP is referring to “buy-stop” and “sell-stop” orders, as opposed to “market orders”, for entering trades; not referring to “stop-loss” orders (as opposed to trading without stop-losses).
