When you enter the trade you place your stoploss on SL1, but when do you change it to SL2? Its from a book that I’m reading but they don’t explain this?
Whenever changing it to SL2 produces a better overall result, over a few hundred trades, than not changing it to SL2.
In other words, you need to work out, by researching carefully, which works best for you. That’s one of the reasons it all takes so much time and calls for so much patience.
For myself, what works best is not changing it at all until I’ve made a couple of profitable trades each day, and then after that changing it every time there’s a new swing low or swing high according to my definition of each for my own purposes.
But there’s no reason to think that what works best for me (or for anyone else here) will also work best for you. It’s something you can only learn for yourself.
Jelvoo,
Here’s the thing. This book is showing you (on a trendline that already happened) where the ideal place to move your stoploss would be. However, you’re not going to know that while the trade is happening! For example, lets say that after that first bull run and the first time it dropped down to a retracement (where I labeled 1) you wanted to move your stoploss up to just below that level to lock in your profits - but then it dipped right back down and lower by a few pips right after that. So, depending on where you put that stoploss, you may have gotten stopped out.
After your trade went up to position 2, that is when I would say you could safely move your stoploss up to what I labeled 1 - because you have a definite higher high and higher low. If you moved it up to position 2, then when it hit position 3 you would have been stopped out. I think the point is, when you think it has safely moved up far enough that price is not likely to spike down due to volatility, then move your stoploss up to lock in some profits. But sometimes by doing that you accidentally move it up too far and then you’ll end up getting closed out of the trade prematurely.
After time this will feel more natural.