What is best practice when it comes to stop losses? I understand that they should form part of your trading strategy, knowing when to exit if the trade goes against you.
I use the babypips position size calculator but often seem to get stopped out.
I look at the daily range and try to make the stop reasonable, just in case i’ve entered not quite at the optimal point. I also look at the next period up for moving averages that might serve as a resistance level.
Any suugestions much appreciated.
Be aware that spreads on your chosen market can get suddenly much wider than they are normally - maybe 10 or even 20 times wider, depending on what’s happening in the news or in that market. Make sure you allow for this when you set a stop-loss.
S/L are essential to prevent an big loss of capital. You can’t trade without capital. Use 1.5 of the ATR number as a rule of thumb.
What I do is to set this S/L, Watch the trade for about half an hour to see what is happening. If it’s losing quickly I cut it short immediately. If it’s losing slowly I cut it short immediately. Both before the S/L is reached. I GOT IT WRONG - and I hate losing, but I hate losing big, more.
The rationale to being a profitable trader, IMO, is to reduce losses as much as possible. In percentage terms if you’re losing 0.5% instead of 1%, that’s a 0.5% profit !!
There’s always a better trade awaiting. Money management is key to success.
Very helpful. Thank you.
A good point. Although some of these jumps can be predicted with upcoming financial news. However, not always. It’s those jumps that blind side me. But I suppose it’ll come with more experience.