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Why a small stop loss will hurt you! What you should do Hello traders! I am sure when you started out in trading, you heard the saying "cut losses short and let profits run" from other traders. Yes, that is correct, but it lacks something important. What is exactly a stop loss? How big should it be? Least probably you asked these questions when you read them. If you don't know what a stop loss is, it is a price line as to when the prices hit it, you "cut" your losses by exiting your position. Here is an example: Unfortunately, many traders interpret it as that a loss should be cut short immediately, and that the stop loss should be small in relevance to the target price. The traders now translate this to having a small stop loss to minimize loss. Seems right at first glance, but it is not. Why is it wrong? I can give you reasons you should avoid small stop losses : 1. Fails to take into account market volatility Let us take Stock X. Let's say this Stock X trades from $10 to $11. If you put your stop at $10.9 for example, it is very likely your stop loss will get hit by useless market noise and even the spread of the bid and ask! Oops! 2. Overwhelmingly high losses Thinking that a small stop loss gives you small losses? Simply wrong logic. Because your small stop loss gets hit every time, you lose money every time. The losses accumulate, therefore, become very high. 3. Psychology of the trader will be in a bad state How do you feel when you lose 10 times in a row in trading? You feel irritated and sad, right? Of course! That is what happens when the number 2 reason takes place. Your trust in your trading system will plummet and irritate you. The irritation will affect your trading, therefore making your trades gut-based and emotion-based, a mortal sin of trading. Then you lose money. These reasons may give you enough evidence to still avoid small stop loss. But I bet, there are still many of you who strongly disagree, including trading "experts". But, I will give solid proof as to why. I used a backtest site called StockbackTest (which by the way is not a recommendation to use) to backtest a simple system that Shorts when the MA200 crosses above the price, and Longs when the MA200 crosses below the price. I will be showing the results of this simple system(which by the way is not a recommendation also) on AAPL 2 times from 2005 to 2015, with a profit take if profits are 10%, but the only difference is the stop loss is 0.2% and 5%. Check below: 0.2% Stop loss 48.1% win rate 16.1% return 5% stop loss 52.4% win rate 58.2% return Yikes! The 0.2% stop loss gave only 16.1% returns, very small compared to the 58.2% return of the 5% stop loss. This is not the only proof. Many famous traders like Jacob Bernstein also has performed backtests on small stop loss vs large stop loss. Here is a visual scenario of a small stop setup: Speaking about stop losses, how much should be your stop loss? Here are some basic guidelines: 1. It should be based on the volatility of the market Let's take an example: Futures X trades at $93 - $95. An appropriate stop loss would be at around $91.5, because you wouldn't be stopped out so easily, giving room for profits. Refer to the diagram below 2. Historical Price Support/Resistance A stop loss is more likely to do its job properly if we base it on support/resistance. The support/resistance can be a trendline, a Moving average, etc. Refer to the diagram below One last thing: Stop loss is not the only thing you need to know. You also need to you entry points, indicators, etc. Thank you for reading this lesson about stop losses! Make sure to like, follow for more. Thank you! :D :} :) :]
NASDAQ:AAPLEducation
by Trader_ph
Will USDCAD reverse the trend?The down movement from the last month was broken, and now the price is testing the trendline again. We already have higher bottoms and a break to a previous peak. This allows us to expect a reversal and a new rise. When starting an up movement, the price must reach at least: 1.2835 and 1.2869 The possibility is spoiled by breaking the previous bottom. If you have questions about how to trade this or another situation, contact us! To support us, like and comment!
Long
by ForexTrendline
It's Time For Ethereum ✨✨✨Hello again folks, I hope you enjoyed your holidays and listened to my advice to get some rest because we're going to have an exciting year in crypto markets. Let's start with Ethereum extraordinary movement ahead.. ETH had a rally from 730 to 1280 and after that it went into a resting phase for around 2 weeks.. The good news is this resting phase is broken with two strong candles in 4H chart and it's trying to retest the previous consolidation channel.. As you can see in the chart it's our smart option to start our buy/long positions here in this area of pull-back.. You can see the way I analyzed ETH will move throw the targets with the green arrow.. the next rally is starting now.. So check the targets on the chart.. I want to read your comment about the idea and feel free to ask me any question about my analysis.. Buy at: 1240 - 1290 Stop-Loss: 1055 Target 1: 1393 Target 2: 1680 Target 3: 1770 Target 4: 1960
Long
by ArshiaZojaji
Trend following - a different way.As folk who follow my posts know, I don't keep any secrets. I explain some of my methodology in this chart. It is bespoke. To be 100% clear, this will not work 'for you'. No methodology works 'for you'. You work the methodology through experience to create your advantages. I'm not saying that people should change to this way. I do not interfere at all with what traders want to do in their favoured methodology. There is no one road to the promised land. Controlling loss is the highest priority. The markets are there to 'eat you alive'. Price action is an important part of all this. As well, it is important to understand your particular market and learn its ways. Oh yes - with time you can come to figure out certain probabilities that may not be shown in the 'technicals'. What you see in this chart can be done on any time frame from 3 min to 1-day. I can't explain everything in one chart. I've done videos on this before. Note carefully: I do not sell anything. I do not do trainings or take anybody's money. I do not sign up to any services. I do not provide evidence of winnings or losses. Disclaimers : This is not advice or encouragement to trade securities on live accounts. Chart positions shown are not suggestions. No predictions and no guarantees supplied or implied. Heavy losses can be expected if trading live accounts. Any previous advantageous performance shown in other scenarios, is not indicative of future performance. If you make decisions based on opinion expressed here or on my profile and you lose your money, kindly sue yourself.
FOREXCOM:US30Education
by Captain_Walker
ATR Indicator - How to Avoid Getting Stopped out of TradesIn this post we can see how the stops were taken out beyond. the 26600 price level. For any setup that a noobie trader may place, the SL would be taken out at this level; However using the ATR indicator we can avoid getting stopped out and keep our trade. I recommend you watch some videos on this indicator to get a better understanding but the main jist of it is -> Take a sweep low/high of a range and add/minus the ATR value (on the sweep candle) to get more legroom for price to move (but it will miss your stop) I hope you find this useful.
Education
by faken
1
BITCOINHello good morning receive a cordial greeting from L.E.D investment management, and a Merry Christmas and a year less ;) poop than 2020 ;) Bitocoin has shown very bullish behavior during times of volatility by marking new records so you have to be more careful because more careful as more inexperienced are involved in the fantastic investment strategy always bullish, this might really be a bubble!! Care to do this adjust your stop loss and I will help you with supports have them marked, key lines, like 19812,3 0 16327. What do you think of bitcoin will remain bullish or be a bubble and wait for correction, let me know in the comments . THIS IS NOT FINANCIAL ADVICE . A cordial greeting from L.E.D good investment good luck In Spain at 28/12/2020
OANDA:BTCUSD
by wallstreetstocks
Smart Money Concepts -Liquidity Grab - Video 1 This video is intended mainly for the purposes of me to rewatch and so I can retain information. In this video, I analyze the GBPUSD on the 1H chart and explain the concept of how a liquidity grab was performed and why it was performed. The Purpose... of this explanation video, is to serve as a reminder by explaining of one of the key fundamentals of trading for accurate predictability by using the Market Structure. Why is this important? The Foreign Exchange Market, any market even, requires 'Liquidity' or 'Volume' to create the charts that you see on your computer screen in the first place. 'Liquidity' (essentially) = $$$ (Money in the form of your stop loss) Large moves in the market require large liquidity, hence why so often you will see a large spike in the market that seems to make no sense and may stop you out of your position, before then moving in your predicted direction. With this in mind, its very important to be mindful of how these 'Liquidity' Grabs are created and to be able to differentiate, a Liquidity Grab, from a true price push, so this way you will be able to trade with the trend accurately instead of against it.
by The-Hoss
Watch the Indians The Indians are in a similar position to many other stock indices. Three things can happen here: 1. Price goes below the amber ATR line, and then rocks north like a bat outta hell - or 2. Price collapses below ATR line and continues south for a while. 3- Price continues to range within a horizontal band. Whatever happens there is money to be made here - if you control your acceptable loss. If you have dosh to burn take long or short. If you don't have dosh to burn you could play a ranging market on a 3 min to 5 min time frame milking small trends that can run for hours. Or you can do both of the above. Skill and experience cannot be provided in this post. Trend following is far more difficult than other forms of trading with potentially heavier losses and extraordinary gains. There are no targets in true trend following. Hence only about 20% of all traders according to research are true tend followers (not to be confused with trend continuation trading).
FOREXCOM:US30
by Captain_Walker
EOS Buy PositionEOS is going to complete a harmonic pattern.. I believe buy position is above the "B" point and stop-loss below this area.. EOS has three different target for "D" point.. Whenever the price reaches a fib level marked in chart, you should check the price action to understand if EOS is going to the next Fib level or not.. Follow my profile for my further comments on price action at each level.. Buy around: 3.148 Stop-Loss at: 3.110 Take-Profit at: Target1 : 3.256 Target2 : 3.334 Target3 : 3.432 This is my idea... What do you think??
Long
by ArshiaZojaji
Review of back to back CADCHF trades.Evening traders I just wanted to share two trades I've taken in the last two days on CADCHF working the 30M time frame. In previous Forex ideas I have noted using the strategy I am utilizing on the H1 time frame following trend until next signal presents. But this strategy is adaptable to how you would like to trade. In this example I have set my parameters to work to a stop loss and take profit setting. The setting is a 1:2.15 risk to reward ratio. Back tested from when I started trading this pair on March 4th in this manner you will see the results at the bottom of the screen are 79% gains on capital. This from risking 2% of capital per trade. $200 dollars was risked on these trades for a $430 dollar gain on capital. Trade one was a 31pip profit move and trade two a 29 pip profit move. For any more information on the strategy I am using please feel free to drop me a message.
by RichScott
Bitcoin stong movement upsideFast analysis. I think this will be the last shake off before BTC brakes all time high. We saw really stong bull move from 18 600 to here, in 3 hours. If we stay higher than the support line I believe we will break and if we close higher than ATH we keep going bull until Christmas and New Years selling. Remember that nothing is certain and use stop losses if you do trades! First mistake beginner traders do is taking to big risk! I'll put analysis from chart on Bitcoin Dominance later on if I have time. Anyways.. Let's enjoy the price action where ever it goes! ;) Regards Jebu
BITSTAMP:BTCUSDLong
by PalenTrade
The Early Stop-Hunter catches the WormThis is a textbook pre-London setup. During the Asian session we often see (especially in Yen pairs) moves that set up for the London session. What this does is provides us with liquidity of retail trader stops that we can take advantage of. This was a simple 0.7 R trade that I was in and out of within 45 minutes. It amazes me that traders still put their stops above/below swing points and prior structure, you're basically asking me to come and hunt you down! Also, side note the reason the R is 0.7 is because my strike rate on this strategy is s high, so I don't need to use the absolute poor excuse of *I use a minumum 1:3 Risk to Reward because I can lose 40% of my trades and still be profitable* - IF your strategy gives you a 40% strike rate, it clearly doesn't work! Rant over! Good morning anyway guys, go smash the day!
by Kieran_Duff
Why having 2 TP targets is good Hello, in this educational post I will be talking about why having 2 or 3 TP targets is good. As an example, I will be using one of the trades I have running currently on EURUSD. My initial target for this short position is to hit the lowest point of yesterday and it was going well until a pullback happened which is currently happening right now and probably reaching my entry point. If I didn't have more than 1 TP target, this trade could potentially be a loss or a breakeven but since I had another target that is closer to my entry point, I could close half of my position, move my SL to breakeven, and secure some profit. On the graph, you can see that I secured 33.5 pips of profit by closing half of my position so that if the price reverses, I would still gain some profit off of this trade and it did eventually reversed. A rule of thumb I normally use for my first TP is half of my final target or a closer/weaker support/resistance level. I do not recommend having more than 2 or 3 targets if you are relatively new to trading. *This only applies to Intraday Trading, Scalp, and Short Swing Trades.* To conclude all my points: 1. Having another TP before your final target is good to secure profits in cases it reverses. 2. Move to SL to breakeven once your first target is reached so if it reverses, you are guaranteed profit. 3. A rule of thumb I normally use for my first TP is half of my final target or a closer/weaker support/resistance level. Please give a thumbs up if you agree with the educational post and if there are any questions, feel free to comment down below.
Education
by AresFx