Question for experienced traders about stop loss

Trading Discussion
#1

Hello peeps. I’ve finally figured out a strategy that works for me and is consistent. I use different risk ratios depending on my signal and expected profit. I will not take a trade unless there is a minimum 2:1 risk/reward. My question is about the stop loss. Should I set my Profit target and stop loss and let it play out until one is achieved or for example I have a Target of 4 times my risk and Im currently up 3 times risk. So I risk $10 for a $40 reward. Currently I’m at a profit of $30. Should I move my stop to Break even or even higher or let it ride out regardless? Which method do you guys prefer?

Donkey Jaw

#2

Hey,

depends on how you trade. swing daytrade investing etc…

in daytrading it may be wise to move your stop loss to brake even, i for my part usually never move my stop losses as simpy that after a while in a trade the price has usually gone far enough that it is extremely unlikely that within one day my stop loss isbeing triggered.

the only scenario where i play with stop loss is when i scale into a trade. the more positions i add in a existing trade the closer my stop loss moves to brake even.

its all on you how you play the market, you have to find your way. Im no friend of stop losses anyways, especially in my beginning the stop losses were the biggest reason to lose money as i got stopped out very often (veryyy often) at a point where the price barely hitted my stop loss then reversed into the desied (my) direction again and all i was left with was lost and nervocity.

#3

I am swing trading. Using daily charts. If a setup looks good Ill enter a trade. Currently one of my entries is a 4:1 Risk/reward. Currently I am at 2.5 times my Risk. So I moved the stop loss to 2 times risk. Is this a good strategy or should I have kept the Stop at the original spot?

#4

it is always good to be in plus and earn. on the other hand you must take care that you dont get stopped out on little fluctuations. In my eyes (but thats my view, you dont have to agree or take it as a hint or advice) you pushed your stop loss to close to the price. a hour or two against you can kick you out and you face leaving a trade too soon.

One thing i learned the hard way is: when you close a trade to soon, to your psychological stage it is the same like loosing a trade. it does bad and gives you the feeling of having lost even thou you had profits.

a risk reward ratio is something that has to be kept in place and sticked to it strictly.

i would have maybe moved my stop loss in your position to 0 (brake even) and let time do its work.

#5

Thanks for the advice. I’ve been a stock trader and have converted to forex back in September. Its taken me several months to finally find whats right for me. It says you’re in Frankfurt? I stopped by there back in September, actually right after I started trading Forex. We were only in the train station on our way to Bonn but the cathedral looked very amazing/ominous.

So for the advice, danke schön!

#6

youre welcome :slight_smile:

yes frankfurt, but if you saw ony the train station then you didnt see anything, the train station is basicly the “b-um hole” of frankfurt hehe

#7

I wish I had more time to explore there. I did a short tour of Europe… Bruges, Bonn and Amsterdam

#8

TURBONero, I will probably stick to your advice as I notice that so many times I will get stopped out by moving the Stop.

I would however like some addition advice about this idea. Once I have achieved a a profit equaling my risk, a 1:1, what if I move my stop ever time I hit another level?

So If I risk for example 100 pips and now Im at 100 Pips profit, I move my stop to break even, and then when I reach 200 pips profit I move my stop to +100 pips, and then at 300 pips profit, move my stop to 200+…

does this sound logical?

#9

You could also try a trailing stop-loss with a set increment,

for example you could set it to move up every 100 pips in profit, or every 50, etc.

You could also use a dynamic trailing stop loss, that moves up pip-by-pip…

#10

Stop Loss: More risky than you might think

#11

I agree with PipMeHappy.

its up to you how you calculate your risk or stop loss. But what i read in a great book and i am sticking to it eversince is: before you close a trade put yourself in the opposite position: would you go the contra position at that very moment? meaning when youre short do you see reasons to go long? i dont close trades untill i see a reason to go long in the same very second i close the trade. That makes stop losses obsolete in my case, they are usefull when you enter a new trade and it goes against you, but after youre already in profit and your “idea” proved to be right (at least for peoplewho trade longer time frames) a stop loss is not really needed anymore as you got plently of room for movements and new analysises. Thats why i never move my stop loss aswell as it became useless aftera while.

#12

I like this thread too,

and I especially like what ‘John Leonard’ has to say, at the bottom of the first page:

http://forums.babypips.com/trading-psychology/54441-trade-without-stoploss-think-out-box-can-you.html

#13

Nice read PipMeHappy.

I have a decent amount in my account but just because i can trade Large Sums doesn’t mean I will. I only trade what I have set as a defined risk and if I’m profitable and meet my target then my risk will increase but only in defined increments

#14

Prevent loss function may be very vital and you ought to have the ability to distinguish in which to set it. A too tight forestall loss may be without difficulty caused even when you pick the right course. And a too extensive prevent loss is like having no forestall loss

#15

Thanks for all the advice guys! Greatly appreciated. I have one question maybe you can help me out. I get the the whole support resistance thing. What I don’t get is when Looking for an entry ore even an exit on the daily chart, which support/resistance points are the most relevant? Is it the point where prices has touched several times?

#16

Happy Easter by the way.

#17

thats a little bit hard to explain. you know, you can find stats etc. on the internet telling 3rd touch 4th tuch etc etc. but in fact you have to have a feeling for that kind of things which comes with time. Usualy the price behaves a certain way before it touches the line, that behaviour (with experienced eyes) can tell the observer if its going to shoot through orbounce back.

stick to the statistics is my advice, if a line has held for 3 touches, possibility that it will hold the 4th is higher then that it will brake through.

#18

I agree about the “feeling” part. Again nothing is guaranteed in this business.

TURBONero and PipMeHappy, are you both professional traders? That means is this your only job?

#19

This is astonishingly translated stuff - just like your other nonsense-posts.

The original sentence from wherever you stole your post, before feeding it in and out of “Google translate” (or whatever you’re using), obviously read “A too-big stop-loss is like having no stop-loss”.

Some of this translation software is so bad that it will translate “stop-loss” in two different ways within the same sentence.

“Stop” can - in different contexts - be equivalent to the word “prevent” and/or to the word “forestall”. But that’s when it’s used as a [I]transitive verb[/I].

I suggest that you either feed this nonsense in and out of a better and more context-sensitive translator, or just stop bothering altogether (probably easier all round?): if you’re trying to look like an authoritative source for what you’re “answering”, it’s certainly not working. :23:

#20

Very good point, Lexys!!!