My strategy tells me when to get in and when to get out but it doesn’t tell me where to place my stop loss and I’m having a lot of trouble trying to find the appropriate buffer zone, to give my trade room to breath and move but not so much that my trade remains open for months.
So I typically hold my trades for a few days to a few weeks max so common sense says to give it a good amount of room to move but how much is a good amount? I tried using the average true range to come up with a number and that depends on the pair but typically for eur/usd it’s around 60 - 70 pips. So given that it can move that amount in 1 day, I thought perhaps twice the ATR was a good number, so about 120 pip stop loss.
But because my stop loss is so large, I have to trade with very small lot sizes. So if you’re planning to hold a trade for a few days to a few weeks, how wide of a buffer do you typically give it?
Thanks.