How much Breathing space should i allow?

I realized that my Stop Losses are lousy and even though i feel that they are quite wide, it appears that once i hit the stop loss, price reverses to my position! It happened to me at least 3 times or so!For example i made a short trade today and placed a stop loss just above the Pivot Point at 1.09776 and price went up to 1.09788 and then it reversed and now it’s at 1.09283!!! The pivot point is at 1.09700. 7 Pips felt more than enough! I’d really like for some suggestions here because i have a feeling as if the way i use my Stop/Losses is like a Grim Reaper instead of a Protector of my capital. This has to be so far my greatest weakness because it kickstarts my emotions and my greed and puts me through greater losses.In fact now that i can recall from my Trading Journal every time i had a “winning streak” and then this occurred, everything came crumbling down.

Thanks in advance!

On a pair like eurusd where 100 pips movement a day is common, 7 pips is nothing.
There are plenty, myself included, who will use stops up to 200pips on this pair, but 20 to 30 is probably more common.
Are you live yet or just in demo?

I am still in demo. I am practicing different things and ideas trying to gain skill and knowledge. Anyhow, the 7 pips i meant was above the Pivot Point which i predicted that would hold. My stop loss initially was 15 pips and the 7 pips i mention is the “breathing space” above the Pivot Point.And price reversed just 1 pip above that.

15 pips is still close to nothing. If some news are released, such a small stopploss is very likely to get hit.

so you ratio is 2 risky : 1 reward. how long for your position ? do you get profit with this strategy. i think we will tired with it. do we can use the forex bonus for it ?

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Take a look back on your charts…notice how many times a wick/spike penetrates a pivot point but doesn’t close there…
Also, be aware of weekly and monthly pivot points which well…some time during the week or month will be hit and they are often near some daily pivot points.
Many traders are so fixed on the daily points that they forget to think that there is other levels to be targeted on the higher time frames.

If price is above daily pivot and I believe it to go long, I at least put my stop below daily support 1 or if it is below daily pivot and I believe it to go short…stop loss is at least above daily resistance 1 …at least!

Try to make it a rule, where ever price is put stop loss at least 2 daily pivot levels away from it…

Now you have made room for breathing and spikes so your stop loss doesn’t get hit at once…though, if price action shows a move towards your stop loss and close giving you a signal that your trade is going bad you take it of the table even though stop loss hasn’t been hit. The SL that far away is just a insurance in case things happens to fast…

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when you are making use of pivot points, you stoploss start from the pivot point. E.g if you enter a sell trade at 1.1500 pivot it at 1.1450 your stop loss is whatever you have in mind plus the pivot i.e 15 1.500:= 1515.

Thanks for this! It sounds wiser to use stop loss that way. Having in mind when things start look ugly and use S/L to get out when an event pushes the price beyond my expectations.

Dont know if this will help. but I use ATR average true range and the setting i use are usually between 1to 2.5 depending on the trade another good way is with ADR.

It really depends on the system. To be honest, it doesn’t even matter as well. [B]You are focused on increasing your winning ratio, when increasing reward to risk is what matters.[/B]

In other words its much better to get stopped out on 10 pips or 20 pips and then let your winners stretch out as much as possible.

A more practical piece of advice is to set your stops mentally to a candle close. In other words tell your self (my stop will be a [B]close[/B] below this level rather than a touch of that level.)

That’s because of stop hunters. Banks and the like usually push price for brief moments just above support and resistance areas so that they can trigger your stop loss and take your money. They rely on you placing the stop automatically, so they just push price for 10-15 seconds. But if you place the stop using the close that means they must hold the level for the full candle (1 hour candle for instance) which they cannot do unless there is a real change in the market direction.

Hello Gchar

Your stop depends on many things, first your time frame that you trade, for example if you are trading using a day chart, then you can use daily pivot points as SUP and RES and also not forgetting the weekly pivots, just as TYGMA mentioned. If you are trading on a 4H chart your stops will probably be narrower, the lower the time frame the narrower the stop unless you are entering on short time frame charts with the purpose of exiting on longer term time frame charts.

Assuming you trade one time frame (Day, 4H aor 30M) you can set your stop loss in line with the volatility of the price (which also changes in time).

Example, you want to scalp the NSDQ100 on a 30 min chart today, so you check the updated volatility of NSDAQ100 in different time frame and you focus on the latest 30 min volatility (which is less reliable than the 4H volatility but more reliable than the 5 min volatility) and lets say the number is 0.16% so this means you can set your stop loss at 16% (0.16 X 100 for 1:100 leverage or 0.16 X your leverage). it would be wise of course to enter at an extreem low/high or at a crcual pivot point and then place a stop loss in line with the volatility at that level.

In all cases make sure your stop is based on Technical Analysis, (below a crucial Sup or above a crucial Res), how far the stop depends on your time frame

Since longer term charts are more reliable than short term charts you can use a Day or Week chart and check the volatility (which will be bigger here than short term charts - eg: 30M…)

Another way to check volatility is using bolinger bands or two Moving averages, one for the highs for the last 20 bars (for example) and one for the lows for the last 20 bars.

Put in mind volatility changes hence whenever you make a trade dont use the last % stop in line with the last volatility but check latest updated volatility and use that BELOW the support or ABOVE resistance. this way you combine technical analysis with price volatility and it s harder for your stop to get hit. Good luck!

This is a site to check volatility on many time frames for Forex and Indices
Forex Volatility | Myfxbook

You have to discover how much stop loss and takeprofit should be used. Generally stop loss should be place at a level if price go there u will be confirmed ur setup is reversed. 15 pips above or below support and resistance is sensible stop loss to me.

Hmm sorry if i sound too foolish but how do i calculate that volatility percentage? Is it through an indicator or is it the price change in the last candle?

When you have observed frequently that the prices starts reversing from your sl point, it is time to consider the mental stop loss apart from this also ensure that the strongest levels are kept on watch. I know how it feels to lose money and then the market gets right on to our trade direction.

Well i understand this Mental S/L BUT aren’t i supposed to stick to my trading strategy? After all a move like that proves that i wasn’t truly ready for an entry point! Unless of course the price moves towards the S/L like it’s on fire which is pretty obvious.

Hmm quick question: Should i apply the same 15 pip rule on Take Profit as well? Fore example when price hits a support or resistance level and passes it by 15 pips (for my profit of course)

Why not set your SL at 15 pips then change to a trailing stop when its in profit and let it run?

Sticking to trading strategy is certainly important and such points are argued over and over. There is certainly risk involved with the mental sl but what if the market reverses and this works only when you are aware of strong price levels. In such scenarios i would rather determine the amount of money am willing to lose rather than sticking to my trading strategy or rules.

Yes that is true. If i applied that yesterday i would have managed to make money than loose. By the way i realized that a strict S/L in significant levels tends to be double-edged sword killing you right before price reverses!

By the way Eddieb, that’s what i am doing with the Trailing Stop but i don’t know how much Pips for trailing i should allow. Currently i use 12 Pips Trailing.In stocks i use 8% Trailing but that’s too strict for Forex.Especially Eur/Usd.