I was just curious how you guys chose where to place your stop loss when you trade whether it be trading without one or just a straight up 20 pip t/p and s/l or using support and resistant levels?
Also how and why did you decide to chose the rules you follow for placing stops?
Hello, first off all what you need to know is that you can only afford to risk about 2% of your capital. If you want to know more about stop losses than I have the perfect video about the ATR range for setting stoplosses for every kind of trader.
The video is quite useful and worth watching, but I’ll play devils advocate and give you a counter argument against the use of ATR stops
When ATR is low, traders will use tighter stops, which often means that in order to conform to money management rules they often increase their position size. When ATR is high, they require wider stops, which often means a reduction in position size
The problem of course is that many systems tend not to perform particularly well under conditions of low volatility. Consequentially using ATR based stops, you end up taking your largest positions when your system or method is performing at its worst ! Additionally, if volatility is low, it’s tends to get higher, which means stops set yesterday rant really applicable today, and if you increase them you break money management rules, and if you don’t increase the when volatility increases, they risk getting hit
The converse also applies that by using ATR is periods of high volatility when your system historically performs the best, you are taking the smallest positions !
Obviously all this depends on individual methods and systems, but the arguments for ATR based stops really are not as simple as those kinds of video make out.
I completely agree and using stop losses with ATR indicator won’t be used by a lot of traders. I have never had problems with the ATR stop losses because it works fine with my method but it doesn’t mean while it works with my method it’ll work with every method.
Practice and Observation is the key to developing your own rule/strategy. Setting StopLoss varies from strategy to price action. Sometimes, I even trade with setting stop loss.
Hey, thanks for the video it was very helpful especially since i’ am blindly feeling my way through risk management… is there any other sort of tip you know i should look into for risk management?
I also use ATR stops but this is a good argument. IMO its effectivity also depends on the pair, time frame, overall market environment. But yeah, each to his own. I found a couple more stop loss strategies while browsing the School (Stop Loss? What’s That? | Setting Stop Losses | Senior Year | Undergraduate)
