I’ve been thinking about stop-loss lately & I’m looking for some general information as to how other traders place them. Obviously stop-losses aren’t a new concept to me (I always use them) but the placement of them can be very different.
You read the generic information regarding the placement of a SL such as “above the swing high/low” or “above the resistance or below the support” but my question to you, my fellow traders, is: where do you place your stop loss in terms of pips?
I’m aware support/resistance should be treated as a zone rather than a line & that the position of the SL can depend on numerous things (your system, volatility of the pair traded, timeframe, personal attitude to risk etc) but all I’m looking for is a quick & simple answer along the lines of: if it’s horizontal resistance on the 1hr then my SL is 15-pips above it or if its a pin-bar candle, my SL is 10-pips above the high (bearish examples due to avatar).
Assuming I get answers, these will vary from system to system & obviously person to person, but I’m looking for a general consensus & a range just to satisfy my own curiosity. For some reason, I have the impression that this is something that folk won’t want to discuss (let alone in any detail/depth) so please, prove me wrong. You can name specific pairs, you can average, just an intelligible answer would be appreciated (I’m sure I’ll get a smart-arsed answer or two).
I think the problem here is your looking for a hard and fast rule, when there really is none. Basically you want the rule to be its ALWAYS x number of pips from this area. When markets are dynamic so your stops and targets should be dynamic, based on what you see in the current moment. But just for entertainment purposes here is a picture with some stop placement ideas.
So lets go through an example from todays market on eur/usd. Its a fairly classic head and shoulders pattern, I have marked it in yellow. We are doing the textbook entry at the break of the neckline. Of course your a bear, so we get short. on the bar with the red arrow above it, at the red line. I have drawn 5 possible stops just on this entry alone. This illustrates how flexible it is, its based on the persons judgement, risk tolerance, trading style. Some get stopped out, some don’t we have to be fair here since we are using the benefit of hindsight.
From top to bottom, (i am using +5 pips thats really arbitrary but IMHO it should be enough to cover spread and then a little bit more its really up to you).
+5 pips from the most recent highest high
+5 pips from the most recent fractal swing.
+10 (just to change things up) from the top of the entry candle.
2 x ATR = 60 pips from entry
1 x atr = 30 pips from entry.
now of course you could just have fixed stops like your stop is always 30 pips from your entry point and be arbitrary.
Just a few examples on 1 entry, i could go at this a lot more but i think the idea is clear. The farther away the less chance you have of getting hit, the more you risk, and the less favorable risk:reward ratio you get. The closer is obviously the opposite. You are just going to have to figure out for yourself where your sweet spot is, and how you like to trade. Because the next time you see a head and shoulders, its probably not going to look like this exactly nor trade like this exactly. So you never know when you put the trade on, which stop is going to be best.
For me I cant speak for others but when I enter a trade I know where I will be prove wrong. Sometimes it is at the bottom of a pin bar on resistance. I will also look to see if a well known MA, pivot, fib or somethinf there is close. If there is something I will place my stop below that to. Just in case. Now the stop determines my lot size (which determines my profit at the end). There are sometimes its all there in a close range but that range is out of my risk league (I am back with a small account) then I will watch the trade pass (even though I know its a good trade). Its not worth it. In the end its not about what you make but about what you save (what you do not give back) that counts.
Then after all aspects are covered if I decide to take the trade I have no set amount of pips above this level I am looking to as I am wrong I will watch watch everything as far as risk/reward, probability. Hate to say it but every trade comes differently and has its own set of circumstances behind it. Its all laying in plain view just how much are you willing to risk for the reward to may get.
Now also keep in mind the probability of you hitting at least BE. That is most important DO NOT LOSE WHAT YOU HAVE.
I think what you laid out here as to where to place your stop lose is correct. You already have the general idea. It all depends on what type of trader you are or how do you normally trade scalper, intraday, daily, weekly and so on. The SL for scalpers are tight say maybe 10 pips. Intraday, maybe between 20-30 pips. Day trader, 100-150 or so. Weekly, I don’t know maybe No SL in place?
So, if you’d like, try them all (on DEMO) and see which one fits your trading style… I am more like an Intraday so I place about 20-30 pips on a S/R level or Pin bar. I also trade news events and still learning about fundamentals.
PipN sorry can I call you that? I have to agree to disagree here. I have many many times had swing trades with a 10 (or less) pip stop. These trades have gone for 100+ pips. I have done this on these forums many many times. It depends on the trade setup and not so much on what type of trader you are. At the end of the day if your wrong your wrong its up to when you are will to accept this fact and cut your losses.
Now there will always be those time where you get stopped by a pip or 2 no matter where your stop is, just to see it go in your favor (this also dont matter what type of trader you are but the setup).
I am not picking on you. You just stated something I dont agree with as a trader (but we are all different as traders). The way I see it I will start a trade on a smaller time frame (based off a larger time frame for the most part). This gives me the smallest stop possible. Think about it though (like I said we are all different) if you put a 100 pip stop you are most likely going to get stopped at 10 pips if you were wrong on that trade idea anyway. Now if you do trade with 10 pip stops and make that 100+ pips. It take 10 losses (pretty much) to whipe out those gains (sure you know the math). What I have found my win% is my win% no matter how big my stop is. Not saying all my stops are 10-pips (especially not this year OMG). But when you are dialed in to the market its there and if your wrong your wrong.
Again not trying to pick on you just you stated something I had something to say about. Right now I have not had these said 10 pip stop 100 pip TP hence my drawndown. Hope I get it back out the markets and they exist just I only look at 2 pairs. I see these setups all over these forums just by the time I reply its to late and its easy to state what happened after the fact even though I dont even look at the cable and fiber unless they are on here.
Has not been so good to me this year on my pairs but its there on others. I see it all the time.
Well, baz asked for a general information about stop losses so this is the best answer that I can think of. Truly, there is no set in stone as far as where to place the SL or TP. I really think SL and TP are base on the analysis that a trader did on a longer time frame such as the 4hr., daily, weekly, or even a monthly chart. If you think your analysis still holds true on a higher time frame in technical and or fundamental analysis, you can place your SL however you want or not to place an SL just do it manually (maybe to a more experience one). I sometimes close my trade manually if I think that my analysis is wrong and I just want to get out of that trade and not waiting for my SL 20-30 to be hit. I sometimes close it around 15 if I see it fit and wait to trade again or sometimes I hold it as far as 50 pip SL (rarely though)… it all depends. I set up like this because my goal is to have at least 50 pips a week. that’s it… I am not shooting for a large pip here every week though sometimes I get more than 50 a week then I get nervous …lol. I am focusing on my consistency more than anything else (this year at least)…
You keep saying you are not picking on me but you just did…lol…you silly
We are only half of the year… you still have time to come back and get it!
Agreed PNR I know I get out early when the market tells me YO you may be in profit now but check back in 15 minutes lol happens to all of us. Good thing id you know when to bail and you know what we are sometimes wrong there to. It is what it is but we banked profits yeaha
Have a good night girlie been drinking and leaving a risk free trade open to see what NFP has for me lol.
It all depends on the trader as each one has his own take on what is the perfect SL, some opt for 20-30 pip SL, others shorter and then, you have scalpers…
Thanks for the input guys. I’m not looking for someone to give me a hard fast answer, I’m merely curious as to how other people place them.
I appreciate the example MeiHua, it’s always easier to understand with a visual aid. All I’m getting at is how you placed any of your suggested SL’s for that head & shoulders pattern will be different from how others would - there may not be much difference with some folk but there will always be be variances & there will be huge differences with others; it’s a personal choice. Being a semi-clueless newbie, I would have gone above the high, by how many pips I’m not sure but the generic advice is “above the swing high”. I definitely would not have gone 40-pips above the high but in theory, it meets the generic advice but destroys your risk/reward. I just want a picture of how others do it.
There are so many factors that come in to place on it & by the sounds of Bob’s posts, one factor that I didn’t think of is how good you are at picking your entries (boils down to strategy) but obviously the SL can be smaller if you get enter the trade at an optimal price. Majorly unlikely (or as I think, near impossible) but in theory, you could have a one pip SL on a weekly chart if you could pinpoint the top/bottom.
I’ve kind of decided that I’m not a fan of demo trading so I quite often experiment with my trading (whether it be SL, entries & anything else that I want to test) & I just open a live trade with say, 200-units. It’s really mon£y, all be it utter peanuts, but a win is a win & a loss barely affects the account & to a certain extent, the psychology is still there. Depending on what I change or decide to experiment with, the position size may vary from 200-units to my usual risk; it all depends on how confident I am about the set-up, aversion to risk at the time etc.
Again, there are soooooo many factors that can affect a SL placement & they’re not set in stone but any answer will assist so thank you.
I always use a fixed 25pip SL while the ATR(3) daily is trading below 150pips and then rack it up when the ATR increases. Nice and simple, and makes money management simple.
I’m a price action trader. I place my stop loss directly behind the candlestick formation, or if I’m trading a break-out, I’ll place it behind the break-out candle. And by behind, I mean like… 1 pip behind. The rules of price action state that a signal is valid until it is broken. So if price moves in the opposite direction behind the signal, then it’s no longer valid and I don’t want to be in the trade.
As to the number of pips. I always aim to take at least 2:1 profit. I trade on the daily charts; so it’s not uncommon for me to have stops of 75-125ish pips at most. On average, I would say probably 100. If I do not think I can take double the pips; I don’t take the trade even if I have a clear signal off of a good pullback or S/R point.
If I trade on 4hr charts; I find that most of my stops are about 45-75ish pips. I usually only look for 4hr trades on EURUSD and USDJPY. USDJPY can be very volatile so the stops are usually much bigger than EURUSD.
It all depends on your risk management. You should know how much you can afford to lose in order to remain within your risk tolerance as well as risk management. I run a more aggressive portfolio and trust my strategy that I risk around 5% per trade. I determine how many pips I can be wrong in order to remain committed to my 5% level and then set my SL accordingly.
Isn’t that kind of counter intuitive…I mean, when setting SL you would probably need to factor in everything from account type to leverage used rather than work out how much open trades is it going to take you to stick with the 5%, just curious, LOL
Given the handicap, it would make more sense for traders, esp new ones to use software that automates the process (NOT EA). Not talking about an ea but more of along the lines of a signal provider which indicates the optimal SL position…
Think there’s one, did try looking for it and ended up with more sales talk rather than an actual product, bleah.
If any of you can provide a way to auto set SL on preferences and other metrics, do list the same.
You should know after a while how many pips you can afford. Since I use the same approach for years I use almost the same pip levels for all my stop loss levels. Yes, you need to factor in everything, but laziness decreases both health and wealth
And that’s something for all newbs to ponder about…there are quite a few apps, broker platform supported graphics which provide all the info you need to set that SL and the open trades, risk mm apps and the list goes on…
The point being, if you are not doing this manually, you may just end up being a tad lazy but on the other side, you could prob use that free time to catch up on news, entertainment and do a read up on all the charts to work out the hidden pattern, but you may end up using an app to do the chart analysis so yeah laziness does set you up for a loss…
Is it just me who keeps seeing this thread title in the Forum as “Las Vegas Stop Loss” - I keep having to read it twice to make out that it does indeed not say this lol
Is it just me who keeps seeing this thread title in the Forum as “Las Vegas Stop Loss” - I keep having to read it twice to make out that it does indeed not say this lol[/QUOTE]
After reading your post, that’s probably how everyone will read it now!
Thanks Jezzode, thanks for ruining my thread
What is a Las Vegas stop-loss? My interpretation would be when you’re sitting at the black-jack table minus all your mon£y, all your belongings & minus your shoes, all the while security is circling like vultures.
happens to all of us. Good thing id you know when to bail and you know what we are sometimes wrong there to. It is what it is but we banked profits