How do I know where to put my stop loss/take profit?

This is a discussion on How do I know where to put my stop loss/take profit? within the Swing & Position Trading forums, part of the Methods category; Originally Posted by NVP most generic trading approaches look at Support / Resistance levels above below the chosen entry and ...

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Old Dec 16, 2015, 1:18pm   #9
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Originally Posted by NVP View Post
most generic trading approaches look at Support / Resistance levels above below the chosen entry and suggest you go just past that as a stop

adjust your stake to equal that stop loss range = the 1-2% you are risking

basically the REAL secret to stops is not to hit them .........use them as hard stop spike safety nets ........good traders can see when a trade has gone wrong inside the stop and bail saving a few bucks ....soft stops ......

when you are wrong you are wrong.........make sure your trading strategy gives you that feedback as rapidly as possible

and if you don't know when you are wrong............boy have you got the wrong system !!

N
So basically make sure my stoploss is at a point where I will lose no more than 1 - 2%? By spike safety nets I assume you mean a random buy/sell of that couldn't be predicted right?

Am yet to develop a strategy i'm learning indicators to find out which ones work well with each other and suit me. Do you have any recommendations on good indicators combinations?
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Old Dec 16, 2015, 2:17pm   #10
 
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More of a general question but I am using a demo account at the moment selling 0.10 on gold.
How much can you afford to put into a trading account..money you can afford to lose

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in order to get the crock of gold..you must first<>find the right end of the rainbow
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Old Dec 16, 2015, 6:03pm   #11
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Okay so would you recommend using MACD in conjunction with RSI for the TA? I have learnt them both although they are both oscillators and I'm not sure if its a good combination. Instead of a take profit then I can just adjust the stop loss as the position I am holding increases in profit.
No, I would not recommend any off-chart indicators and never look at them. I look solely at price in various formats and time frames and at total of 4 moving averages to confirm trend.

The initial stop can be identified from your TA on entry but after that its more a matter of personal risk tolerance / greed / fear.

Another classic approach is to move your stop to your entry point as soon as price has built up a gain equivalent to your risk. Your trade is then "free" and you're not risking anything even if it retreats all the way to your entry and beyond. You could even add to the trade when it gets to this point, but keeping the same risk - now you are risking the same in money as your original plan but you have a position twice as large which could make twice the profit for the same points / pence move.

Exits are such a difficult area, there are ways of doing it but we're each only happy with one or a few techniques once you've done it for real. Apart from anything else. you have to learn what it feels like to be that trader with a stop set, but its the middle of the night and you're trying to sleep.
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Old Dec 18, 2015, 9:13am   #12
 
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well first i would say you have to identify a good trading opportunity. for me, this would be a signal candle in a daily swing level (in an established trend at a retracement point). once i have done this, i look at the weekly chart and make sure that i have my s/r levels marked well. to choose stoploss, i make sure to set it behind the signal candle's high/low, plus a little extra for safety. for take profit i usually shoot for 3 times my risk, making sure i have room before running in to my next s/r level.
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Old Dec 21, 2015, 7:45pm   #13
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Originally Posted by Lúidín View Post
How much can you afford to put into a trading account..money you can afford to lose

Lúidín
I am on a practice account using $3000 and have no intentions of using real money till I understand the ins and outs of everything possible. I will also most probably only start with a small amount like £500.
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Old Dec 21, 2015, 8:10pm   #14
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No, I would not recommend any off-chart indicators and never look at them. I look solely at price in various formats and time frames and at total of 4 moving averages to confirm trend.

The initial stop can be identified from your TA on entry but after that its more a matter of personal risk tolerance / greed / fear.

Another classic approach is to move your stop to your entry point as soon as price has built up a gain equivalent to your risk. Your trade is then "free" and you're not risking anything even if it retreats all the way to your entry and beyond. You could even add to the trade when it gets to this point, but keeping the same risk - now you are risking the same in money as your original plan but you have a position twice as large which could make twice the profit for the same points / pence move.

Exits are such a difficult area, there are ways of doing it but we're each only happy with one or a few techniques once you've done it for real. Apart from anything else. you have to learn what it feels like to be that trader with a stop set, but its the middle of the night and you're trying to sleep.

Okay what time periods do you use on your MAs? I have also traded with them on my practice account using 50, 100 and 200 but couldn't work out points of entry. Do you then work out the S/R price ranges and enter when one is breached?
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Old Dec 21, 2015, 8:12pm   #15
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Originally Posted by BricksNPips View Post
well first i would say you have to identify a good trading opportunity. for me, this would be a signal candle in a daily swing level (in an established trend at a retracement point). once i have done this, i look at the weekly chart and make sure that i have my s/r levels marked well. to choose stoploss, i make sure to set it behind the signal candle's high/low, plus a little extra for safety. for take profit i usually shoot for 3 times my risk, making sure i have room before running in to my next s/r level.
Okay I see, so how do you decide what a retracement point is? Is it when the market is in a stair step pattern like in the picture you posted. But then how can you tell when the market has hit it peaks or its low.
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Old Dec 21, 2015, 9:14pm   #16
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Okay what time periods do you use on your MAs? I have also traded with them on my practice account using 50, 100 and 200 but couldn't work out points of entry. Do you then work out the S/R price ranges and enter when one is breached?

I use 50 and 200EMA to identify underlying trend - if the 50 is above the 200 and price is above the 200 and has risen over the last month, that's a pretty good indication of an energetic uptrend. I rarely go long if price is below the 200.

After that, you can use any handy signal that suggests continuing buying pressure - a hammer after a downleg, a bullish candlestick that is clear above the 50SMA and closes less than 25% off its daily high, a higher range daily bar that closes above the previous day's high after at least 3 consecutive lower range days etc. etc. There are dozens and to be honest, I don't believe any one of them possesses any kind of magic - even price is just an indicator.

At the heart of it all, you can't know which move will continue and which will sputter as soon as your trade is placed. Going with the trend will help. As will avoiding overhead resistance or round numbers. TA off-chart indicators are often portrayed as the gizmo that only gets you into a sure thing: fear of loss is behind this sales technique. For me, building something into my systems that is there to treat a side-effect of doing business is just a distraction and a distortion of my plan. Losses come with the territory and they're not the problem.
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