I have been doing swing, and am working on intraday trades. I panicked today on the AUDJPY pair and lost out after I dipped below my comfort zone in pips loss. It’s been a buy signal since Feb 1,2.
I realize that stops need to be larger for intraday trades, and that leverage and margins need to be adjusted accordingly. Any suggestions on a good tool or rule of thumb for stop losses? I use a 15 pt stop loss for all my same day trades and don’t lower them, if I bust it I bust.
I can’t do the same tight stops on larger time frames. I looked at Andrew’s pitchforks, fib equistant, and parabolic. Suggestions on general stop loss principles and tools you may have used?
I am mainly a swing trader. If I were to enter short end of day, off the Daily chart, then I would enter the trade a few pips below the low of the preceding bar, with my Stop a few pips above the high of that same bar. My logic for this is that should I enter the trade, and then price moves against me to the point where it is higher than where price closed the previous day, then my reason for entering the trade is pretty much gone, any trendline I might have drawn will have been broken. So I want to be out at that point, hence my Stop is always set a few pips above the high of the previous bar. I do the same but in reverse for long trades.
I do the same on the Hourly & 240 charts, so it is not just an end of day approach.
End of day I will often enter using an order, that often triggers overnight. On the Hourly I tend to enter live. It makes no difference to how I place my Entry and Stop.
I find that this gives trades room to run, while limiting my risk. I will trail the Stop if a trade is running well but I want to lock in profit.
If you are doing strategy-based trading, you should backtest to see what the average peak higher/lower (the average high/low of the next few bars) for the next few bars are. The average peak higher/lower is a good place to place your stops.
If you aren’t a strategy-trader, then you should do as the other gentlemen have suggested and base the stop off of the highs and lows of the preceding bars.
Hi, if $15 is the max you are willing to lose, you could also consider lowering your position size to be able to set a wider stop. That means if you opened a 0.5 lot instead of 1.0, each pip moved is 50 cents. Then, for the same $15, you can set a 30 pip stop instead. Of course your profit is also less, but if it allows you to win more, eventually you can increment the lot size as your account balance increases.
Setting the same fixed stop to every trade however may not be practical. Like the others are advising, placing your stop just beyond the swing highs or low is more practical. Then depending on how far away that is from your entry, you’d use the above calculation to determine your lot size to stay within the dollar value you are willing to risk.
