What timeframe do I base my stop loss?

Hi I’ve been demo trading for about a year learning and trying to finalise 3 strats. One thing that I can’t seem to get a clear answer on is this: I use 3 timeframes, 1 day main trend ID, 4 hour confirmation and my ‘trading’ timeframe, 40 mins for entry/exit. So multi-timeframe analysis there. However, I base my stop loss off the ATR so 1.5 to 3 depending. But what timeframe do I base the ATR and monitor for exit? Is it the 4 hour or the 40 minutes? Thank you in advance.

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I don’t think there’s a clear answer for that since the ATR reads different numbers depending liquidity but I think you should use the 40 minute or the 4 hour in case you’ve spotted something bigger (a zone or a retracement level or something like that).

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I think you need to step back and ask yourself why you are using different time-frames, what is the purpose of doing that.

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I think it’s up to your setup, a SL is a way to protect your account because of bad decisions you may take in the market

I am using different time frames to get a top down view of the market. I.e the bigger picture on the daily. Confirmation and analysis on the 4 hour and perfecting entry on the 40 mins. What I have read says this should be best practice and that is why I am doing it.

I have assumed that the entry/exit timeframe is the lowest but that obviously means a shorter stop loss.

I am using a stoploss so that I don’t lose all my paper money :money_mouth_face: and blow my demo account if I am wrong about the trade.

I’ve never heard of the 40-minute time-frame - there is such a disparity between the 40-minutes and the D1 that I have to wonder how much D1 time-frame analysis adds to your trading performance. I’m sure that using the highest of three time-frames as a filter shortens your current watch-list but I’m not convinced it increases win rate or return on investment - is it perhaps like insisting that a cleaner for your building holds a university degree? You will definitely spend less time selecting and interviewing candidates for the cleaning job but will the building be cleaner?

If your trade is on the 40-minutes, that’s where you should initially calculate your stop-loss, but you can’t ignore 4H support/resistance.

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The principle is good. The technique may not be.

You may be complicating things unnecessarily with the technique. It’s usually possible to display the kind of thing you’re describing within one timeframe (which makes it simpler and easier) by multiplying the indicator numbers accordingly.

One crude, simple example: if you were using a moving average on a 40-minute timeframe and wanted to check it out on the 4-hour timeframe as well, you can do that without looking at the 4-hour chart just by adding a moving average 6 times as big as the original to the 40-minute timeframe (because 240/40 = 6).

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Yes I am using a ratio of 1:6. 24 hours / 6 = 4H. 4 hour / 6 = 40mins. I used one hour before but trying the 40mins in line with the ratio.

The suggestion about adjusting the moving average is interesting.

I suppose another way to look at it is say you only used 2 timeframes. The 1 day overview and the 4 hour. I assume then you would base your SL off the 4 hour if considering ATR off the 4 hour.

Volatility and time (with live, open markets, obviously) are proportional on a square-root basis.

The ATR of a 4-minute chart is twice as high as the ATR on a 1-minute chart, because 4 is 2 squared. The ATR of a 4-hour chart is twice as high as the ATR on a 1-hour chart, because 4 is 2 squared.

So if you’re comparing the ATR of a 4-hour chart with the ATR of a 40minute chart, it’s 2.45 times as high, because 240 is 6 x 40, and 2.45 is the square root of 6.

But I don’t know whether that helps you.

I would always position a stop-loss according to the price action (swings high/low) not an ATR multiple, myself.

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That’s interesting re ATR, thank you. It can can get a little confusing hence why I am a little confused hah to top it off there are other techniques such as Chandelier Exit, Chande Kroll Exit, and ATR bands… but again they all are based off ATR and that depends on the entry/exit timeframe.

That’s really the “take-home” of the thread. :slight_smile:

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Use 1hr or 4hr time frame because is very improtance

for SL and TP I usually use my 2nd time frame, in the case you are mentioning, it will be h4.

Your trading timeframe is H4 timeframe so I think you should use the ATR/Stop loss on H4.

You can simply anwser the question by asking yourself “how long do I want to leave my trades open?” and based on your anwser you could decide :slight_smile:

I trade the NY-Session, let’s say the NY-Session lasts 8 Hours so I trade off the H8 Timeframe and I also set my SL on the H8 TF, however I use H1 and M15 for entries/confirmation but the SL is on the H8.

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That makes sense. Thank you. I’ve been basing it off the entry/exit timeframe (with some success and trailing) using Chandelier Exit but of course gives you a little less room for manoeuvre than a SL based off the 4hour ATR.