Article A Logical Method Of Stop Placement

T2W Bot

Staff member
1,454 54
Trading is a game of probability. This means that every trader will be wrong sometimes. When a trade does go wrong, there are only two options: to accept the loss and liquidate your position, or go down with the ship.
This is why using stop orders is so important. Many traders take profits quickly but also hold on to losing trades – it’s simply human nature. We take profits because it feels good and we try to hide from the discomfort of defeat. A properly placed stop order takes care of this problem by acting as insurance against losing too much. In order to work properly, a stop must answer one question: At what price is your opinion wrong? In this article, we’ll explore several approaches to determining stop placement that will help you to swallow your pride and keep your portfolio afloat.
Hard Stop One of the simplest stops is the hard stop, in which you simply place a stop a certain number of pips from your entry price. However, in many cases, having a hard stop in a...
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Izzy Fuente

Junior member
36 9
"Another useful method is setting stops on closes above or below specific price levels."

Using the close regardless of the manner in which the stop is derived is going to potentially expose a trader to significant risk. A stop should be based on current price, not the close.
 

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