I have been trading mini lots 2 year now, and my trading system indicators are atleast 58% perfect. But whenever, i adjust my predetermined stop loss to lock in some profits (pips), it get hit, later in the day the pair then go beyond my target intial profit.
This has made me to take little pips than my risk reward ratio of 1:2. i used to believe that i can not go broke by taking profits. But, these profits are not developing my equity account i.e in other words am not progressing with my career of becoming a professional trader.
I usually trade Daily time frame and 4 Hrs. My risk is only 2% of my mini account balance. Any forum member who can help me to over come this problem i will be grateful.
For sure, i did not demo trade, i started using live account but with little capital but my research habit is on average, and atleast am not so green via literature of forex.The decision of trading live account was based on assumption that putting my hard earned income on line make me more serious and responsible.The funny part of my trading habit is when the pair go against me, i leave it until my predetermined stop loss is hit, but the moment i decide to adjust it to break even or slightly above say 15 pips, it get hit. Is there any forum member who can help me to teach me how to determine a pair breathing space. I used to think that once a pair moves into my predetermined biased direction say 50% of TP, its enough but it has failed to work. I tried to look for the solution at baby pips school and i have failed to find it. topic related to how to determine a currency breathing space in forex trading? Any advise will be appreciated.
If your trading journal is showing you that most of your adjusted stops are hit only to go beyond your initial profit target, there are at least two things you can do :
- stop adjusting your stops. you say it hasn’t developed your equity curve. then just leave your initial stop, set and forget about the trade altogether until it either hits your SL or your TP. your strategy allows for that. this is great news really.
- define a bigger take profit target. you say price usually goes beyond your initial profit target. so why not profit from that phenomenon?
make those adjustments and work on your emotions, so that you don’t deviate from the plan. numbers don’t lie.
hope this helps!
Am so grateful for your wisdom, i will do that for three months and get back to you. Indeed my emotions need to be worked on. Define a bigger take profit target my indicators at time show exit
What pair are you trading and what is your strategy? Some screen captures will also help. In order for me to help you I will need to understand what your entry and exit criteria are and where you place your stop losses and when you move them to BE.
If you can privide the above info I might be able to help you.
I usually trade EUR/JPY, EUR/USD, GBP/USD, AUD/USD? i know there are correlated pairs. My strategy is 5 EMA’s, stochastic 8,3,3 and TDI.
When both TDI and stoch are in agreement i enter a position, the 5 EMA help me to see the price action. My stop loss as a rule is based on the lowest/ highest of the previous candle before the entry point. but i make sure the size of the candles at entry are big enough. i only use daily chart but my entry signal are on 4 hr charts of the same pair. Alternatively, if my risk is 2% and say its $10, i use the pip value calculator to determine my stop loss point say risk/pip valve depending on the value per pip in the trading pair. E.g if my mini account uses leverage of 50, EUR/USD AND Value per pip is $0.01556 then my stop loss in pips = 10/0.01556 gives 642. I just enter a trade after entering i add say 642 pips and it becomes my stop loss point. But at times i check also the ATR of the pair for the day to ensure its realistic. Then the TP i just mutiply it by 2*642.
i have screen shot but whenever, i try to paste it here it fails, i have even failed to locate the attachment button here any instruction on how to do it, i welcome it.
There are two main stop adjustment criteria: width and time. If you have already tested various stop width, you can try to change the stop adjustment time. In other words, you have to define conditions to adjust your stop. For example, if your position is +X% from the initial level, the stop should be moved to the breakeven.
Another important point of attention is volatility. Each day you have to measure current market volatility and adjust your system accordingly. For instance, in case of elevated volatility it would be better to increase both stop width and profit potential simultaneously reducing the position size to keep risk-reward ratio.
By the way, have you ever tried to backtest your strategy on historical data? It could give you a lot of information to think about and also would be useful to understand the performance you can expect to in long term perspective. There are a few ways to do this including the use of special software like Forex Tester or with the help of your own algorithm (if you are familiar with coding, of course).
Another important issues is stop loss calculation. As I`ve understood from your previous message, you calculate stop loss point based on your risk. For sure, this issue is rather controversial, but to my mind it is better to define stop loss point in accordance with current market situation (highs and lows, support and resistance levels, etc). In this case your stop point would be reasonable. The main idea is to define stop level first and then calculate position size depending on your risk per trade. It is important because actual stop level that is reasonable in particular situation could be wider or tighter than one you use all the time. Stop loss width is something that should be flexible enough.
642 pips SL seems excessive to me but perhaps once you’ve figured out how to upload images it might make sense to me.
Daily ranges on most majors are approximately 70 - 75 pips. If you’re using the daily chart for analysis then even 3 times the daily average would be about 225 pips. For that reason 642 seems to be too large.
following with interest
Great advice!!
Thank you J C Anderson. Determining stop loss based on market situations i.e high/low of previous candles tend to control my emotions during the trading sessions. But at times my risk per trade if i follow this approach it tend to be more than 2% on the trade.
I have been using the daily chart to determine the general trend, and use the 4hr chart to determine my entry point. The challenge i have here is deciding which market situation (High or Low ) of the previsous chart time frame to use in determining the stop loss. From this problem, any forum member who can help me and guide me on which chart time frame is reasonable to determine the stop loss?. i already have the first step of change that’s awareness of the problem, and the second step of acceptance of the problem, seriously i need help.
Testing my strategy on historical data i did it some time back, but my mind failed to get a way of testing the fundamentals of the past events such as political situations that change investor sentiments. I think back testing work well if the trader is more baised technically without incorporating fundamentals. E.g Weak US Job updates Vs Strong canadian Jobs Update. I stand to be corrected if am wrong on this.
This is a new insight which i have been lacking thank you. I need help on this advise of reducing the position size to keep risk-reward ratio. How do i do this when am already in the trade. say my first position was 0.1 lot short on the pair? or i should only place my orders in small mutliple lots say if my predetermined lot size as per the calculator is grand 0.1 lot. Then i place two orders with 0.05 lots of the pair.
My first chart on AUD/CAD, i shorted the trade today and my stop loss was placed at 0.90457 and my take profit is at 0.89097 entry point is at 0.89868.
I hope from this image forum members will help me.
Qn: How can i reduce my position size when am already in the trade with 0.189 lot as shown in the image?
Significant portions of this chart are not visible to me. It seems like market structure is suggesting a change in trend to the upside. You need to be cognizant of the major trend to consider trade direction especially since you are swing trading. If you’re going against the trend it is very likely that your stop will be hit and you will never get to your TP price.
Besides using indicators for trade entries you need to determine direction and somehow figure out where price is expected to reach. Without that your TP targets become meaningless and are merely a function of your trade risk. You might as well pick a random number from a hat above or below price as your TP.