This post is hindsight but I want to ask whether there’s a guideline on how tight my stop loss should be.
My entry point was to take a short if it touched resistance.
The higher the risk to reward ratio is the more likely you will get stopped out. If you got a 1 to 1 it is 50 50. If you go for 3 you get stopped out 66% or smth like it. (forgot the exact stats)
In your case the stop looks too tight for me. It could easily test the highs go a bit beyond them and then reverse hard on you. The trade needs a bit of room to breath.
Set your stop-loss near where price would have to go to in order for it to have less probability of moving in the direction of your position and more probability of moving in the opposite direction.
For example, for a long position, a level just below a recent support level. If price falls all the way through a support level, it will probably fall further, as it now has no recent support.
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Maybe show us a higher timeframe or more of what’s sitting to the left. You need to get your risk management in control, reducing your position size because your stop is wider.
As a general rule, amongst other indicators, I would suggest using a stop loss of 1.5 ATR(14), that is to say, if the Average True Range is 30 PIPS over the last 14 periods, use a minimum stop loss of 45 PIPS. No need to be precise, but for example, 3 PIPS would be instant wipeout and 300 PIPS is far too wide.
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