How Much Stop Loss You Set?

masonlee

Newbie
5 0
Hello,

Anybody can point me to the right direction on how to set my stop loss appropriately?

Quite many of the time when i place a larger stop loss, the price hit my large stop loss and end up heavy losses.

But when i place a small stop loss, the price seem like tend to hitting the stop loss line very frequently and i have to repeatedly place multiple orders with the same small amount of stop loss and toward the same trend for a currency pair. With small stop loss, even i catch the right trend for a certain pair and earn significant amount of pips but overall i still having negative profit because i have lost quite many pips from many small stop loss trades during the starting of the trend.

Can you give me some guideline on how to set a appropriate stop loss?

Appreciate your help.
 

spinola

Established member
614 137
Based on your method approach used , when is the best time to STOP the trade ? Different method approaches, need different stop (the trade) approaches.



IMHO.
 

Hate2Lose

Active member
155 3
Hello,

Anybody can point me to the right direction on how to set my stop loss appropriately?

Quite many of the time when i place a larger stop loss, the price hit my large stop loss and end up heavy losses.

But when i place a small stop loss, the price seem like tend to hitting the stop loss line very frequently and i have to repeatedly place multiple orders with the same small amount of stop loss and toward the same trend for a currency pair. With small stop loss, even i catch the right trend for a certain pair and earn significant amount of pips but overall i still having negative profit because i have lost quite many pips from many small stop loss trades during the starting of the trend.

Can you give me some guideline on how to set a appropriate stop loss?

Appreciate your help.

In my opinion, there are lots of different ways of attacking this, depends on you, style of trading, time horizon etc.

One way is to work out an ave % movement over the time horizon. For example, you want to hold over a 2-day period, work out the ave daily range % for a pair, then put your stop wider than this. Statistically, in theory, the likelihood of your stop being hit in the time period is lower, but appropriate relative to the market you’re trading.

Alternatively, you might base it on a chart. You could choose to put a stop below support, and take profit at resistance. However, you MUST be disciplined, stick to the plan and go for the appropriate risk/reward ratio. General consensus says go for a 3:1 risk reward ratio, then your profits won’t be eroded by a couple of bad trades.

It’s a marathon, not a sprint!
 

Traderallen

Active member
248 41
No..... There is only one way

I think we just had this discussion two months ago so i'll keep it short. There is only ONE way to set your stop. 90% of the ways being taught our dead wrong. And that's why 90% of traders lose money. You must set your stop outside of volatility!!! If your stop is placed inside of volatility you are going to get stopped out more often than not and you're going to blow out your account. If you want to set your stop wherever it doesn't matter previous high, previous low, two Lows back, some magic fib ratio, or gann angle. That's fine as long as you're outside of volatility. Otherwise you may as will close out your account take the money and donated it to the next person you see the street and save yourself some time. Other than scalping this applies to every other form of trading I don't care if your swing trading position trading day trading long-term short-term whatever makes no difference. You have to calculate volatility take only the trades with a valid entry set up where stop can be placed outside of volatility and what you will find is you will start having more winners and less losers.

Prove it to yourself I would bet if you go back and look at your trades you will find that most of them assuming you're using it valid method. After you are stopped out, and lose your money the instruments your trading goes on in the direction you thought it would without you.
 

tari786

Newbie
2 0
After lots of try in Sl and Tp , risk reward ratio 2:1 is good and it is working very well for me
 

Purple Brain

Experienced member
1,613 179
I think we just had this discussion two months ago so i'll keep it short. There is only ONE way to set your stop. 90% of the ways being taught our dead wrong. And that's why 90% of traders lose money. You must set your stop outside of volatility!!! If your stop is placed inside of volatility you are going to get stopped out more often than not and you're going to blow out your account. If you want to set your stop wherever it doesn't matter previous high, previous low, two Lows back, some magic fib ratio, or gann angle. That's fine as long as you're outside of volatility. Otherwise you may as will close out your account take the money and donated it to the next person you see the street and save yourself some time. Other than scalping this applies to every other form of trading I don't care if your swing trading position trading day trading long-term short-term whatever makes no difference. You have to calculate volatility take only the trades with a valid entry set up where stop can be placed outside of volatility and what you will find is you will start having more winners and less losers.

Prove it to yourself I would bet if you go back and look at your trades you will find that most of them assuming you're using it valid method. After you are stopped out, and lose your money the instruments your trading goes on in the direction you thought it would without you.

I don't think the OP is the only one that would appreciate understanding what 'set your stop outside volatility' means in real terms. It sounds a genuinely sensible approach and I've heard a few mention it, but none actually specify how one assesses volatility on any given instrument and how that assessment leads to setting an appropriate stop.

Could you give an empirical example?
 

Purple Brain

Experienced member
1,613 179
Hello,

Anybody can point me to the right direction on how to set my stop loss appropriately?

Quite many of the time when i place a larger stop loss, the price hit my large stop loss and end up heavy losses.

But when i place a small stop loss, the price seem like tend to hitting the stop loss line very frequently and i have to repeatedly place multiple orders with the same small amount of stop loss and toward the same trend for a currency pair. With small stop loss, even i catch the right trend for a certain pair and earn significant amount of pips but overall i still having negative profit because i have lost quite many pips from many small stop loss trades during the starting of the trend.

Can you give me some guideline on how to set a appropriate stop loss?

Appreciate your help.
Bear in mind I'm only just starting to the hang of things myself and there could be some eye-opening stuff on volatility if those who use it can show us how, but from where I am at the moment I believe there are two aspects to consider.

Whatever timeframe you are trading there will be 'obvious' areas of support/resistance. If you can't see them then it's probably not a good idea to trade that instrument and move on to one which has more clearly defined technical adherence (and adherents!).

There are a number of daily, weekly and monthly technically derived s/r levels which can be useful too. Where you get a confluence of levels within a relatively tight band the probabilities of it being significant increase.

Having identified a sensible level at which you'll cry uncle, the delta between that level and your planned entry level is a given number of pips/points. Use that to calculate what position size you can take on so as to maintain a fixed percentage of your capital at risk for each trade.

I don't think there is any consensus on what that percentage should be, but the majority of traders who have expressed a preference for this approach seem to tend to allocate 1-2% per trade.
 

new_trader

Legendary member
6,571 1,428
Hello,

Anybody can point me to the right direction on how to set my stop loss appropriately?

Quite many of the time when i place a larger stop loss, the price hit my large stop loss and end up heavy losses.

But when i place a small stop loss, the price seem like tend to hitting the stop loss line very frequently and i have to repeatedly place multiple orders with the same small amount of stop loss and toward the same trend for a currency pair. With small stop loss, even i catch the right trend for a certain pair and earn significant amount of pips but overall i still having negative profit because i have lost quite many pips from many small stop loss trades during the starting of the trend.

Can you give me some guideline on how to set a appropriate stop loss?

Appreciate your help.

This is the definitive guide to stops (y)

SOCRATES said:
But I do explain a lot, but it does not land, that is the problem.

You take this thread for example,OK ?

I make a valid comment and then it starts to attract abuse, and the mods have to step in with a fat finger. Why ? Because i give as good as I get, if not better, I always respond fiercely if I am attacked.

Let's talk about this thread.

What exactly does Brett Steenbarger do his best to solve ?

( I have had PM traffic with him and he seems a very decent chap, btw.)

The problems that beset him, and any other house psychologist for that matter is that he has to find a way to bring people to proficiency, to stop them doing silly things, to stop them taking flyers, to stop them reacting incorrectly to market prompts, to help them retain control of themselves, to help them prevent themselves from becoming serial traders out of control, to stop them overtrading, to help them not be emotional, reactive, impatient, and all these things.

What could be at the root core of all these problems ?

Is it the fault of the house psychologist ? No, he is himself, and trying to do his best.

Is it that the people he is trying to help are maniacs ? No they are ordinary human beings in an environment that requires a different attitude, conduct and responses to those they are accustomed to in ordinary life.

Now who avails himself of the help offered by the house psychologist ?

Obviously those who need it, the ones who are having problems, because according to their frame of reference they are doing the right things, but then, frequently, the outcomes they get are not the ones they expect. This is because this group, fro whatever reason, persist in having the wrong responses, the wrong attitudes, the wrong reactions, the wrong way of going about things, the wrong way of dealing with problems, the wrong way of meeting problems and resolving them, the wrong way of responding, of self monitoring, of self governance, of self responsibility and ultimately of control. Nearly all of it is a problem of control.

These are the cases a house psychologist has to deal with to try to help put them right.

Now I get a lot of abuse because I contradict mainstream thinking on all this.

Consider the quiet ones in the corner, who don't fall prey to doing all of the above. They don't need any help and have no reason to ask for any. They keep themselves to themselves. You don't hear them whinging and complaining because they have no reason to.

The house psychologist's skills are not needed by this group. They have a totally different way of going about things and tackling problems. The house psychologist acquires a template to help individuals with problems.

He does not acquire a template for the other group. There is no need for one. The other group do not even comment, they just get on with it. Therefore you could say that the template for the successful ones is missing.

Additionally, the successful ones are apt to guard themselves against being asked too many questions, as it is in their interest to protect their proficiency (notice that I say proficiency and not an edge, because that comes much later) so what happens ? Everyone gets to be familiar with the nature of problems but everyone remains in the dark about non problems.

When I bring this up, I get a lot of abuse.

Now another example.

Some time ago the question of stops was being discussed.

Again, when I commented incisively on it, it served to stimulate the rowdy element as well.

Without going into deep details I explained that efficient traders use very tight stops because efficient traders get it right many many more times than they get it wrong, that is why they are efficient traders, OK ?

Therefore efficient traders are surprised and shocked when they get it wrong. The fact that they use very tight stops immediately limits losses.

Inefficient traders are apt to use wide stops and some blighters none at all !
They now begin to argue, yes argue, that to use a wide stop is the right thing to do because it allows a position to "breathe" and other nonsenses. When it is pointed out that wide stops used by inefficient traders who get it wrong often and really ought to fiercely control losses, they get abusive, or, begin to argue.

That is why I have so many posts under my belt. I have tried in the past to illustrate lots of ideas. These ideas are immediately recognised by a few who go on to use them beneficially which pleases me enormously. The great majority see fit to argue and argue and do not progress.

I am accused of being among other things, a charlatan, a wordsmith, an autocrat, etc.,

The problem is that a lot of people forget about the message being delivered to them and only concentrate on the way the message is delivered and so miss the content altogether.


SOCRATES said:
OK, I will explain.

The single most important thing you have to concentrate on is limiting losses.
You do this by using stops.

As you become more proficient at picking winning moves you have to tighten your stop loss policy.

Limiting losses to the absolute minimum is the key. All else is peripheral.

Now that is a simple statement.

If everyone did this, everyone would survive long enough to eventually become proficient.

But very few have the self discipline to persist in this way.

I strongly suggest you follow the lead I have just given you.
 

Purple Brain

Experienced member
1,613 179
Excellent new_trader. Pity Socrates is no longer around.

For OP's benefit - in the light of the above - I'd like to add to my earlier post and state while the methodology is unchanged I'd recommend he only take those trades where the stop is closer to the current price than farther from it. Cherry pick.
 
Last edited:

Hate2Lose

Active member
155 3
I think we just had this discussion two months ago so i'll keep it short. There is only ONE way to set your stop. 90% of the ways being taught our dead wrong. And that's why 90% of traders lose money. You must set your stop outside of volatility!!! If your stop is placed inside of volatility you are going to get stopped out more often than not and you're going to blow out your account. If you want to set your stop wherever it doesn't matter previous high, previous low, two Lows back, some magic fib ratio, or gann angle. That's fine as long as you're outside of volatility. Otherwise you may as will close out your account take the money and donated it to the next person you see the street and save yourself some time. Other than scalping this applies to every other form of trading I don't care if your swing trading position trading day trading long-term short-term whatever makes no difference. You have to calculate volatility take only the trades with a valid entry set up where stop can be placed outside of volatility and what you will find is you will start having more winners and less losers.

Prove it to yourself I would bet if you go back and look at your trades you will find that most of them assuming you're using it valid method. After you are stopped out, and lose your money the instruments your trading goes on in the direction you thought it would without you.

A sound theory, and in line with my first point. However, I beg to differ on highs and lows. There’s a reason why the ‘hot money’ is buying in at a certain level, and selling out at a certain level. The ‘hot money’ controls the market. If you can get a grasp on this, you’re onto a winner. I’ve seen it first hand.
 

darktone

Veteren member
3,986 1,041
Hello,

Anybody can point me to the right direction on how to set my stop loss appropriately?
Imo there is no correct place to put a stop.

Quite many of the time when i place a larger stop loss, the price hit my large stop loss and end up heavy losses.
Yes, theres a tendency for most folks who use large stops to sit with it in the hope they will be proven right.

But when i place a small stop loss, the price seem like tend to hitting the stop loss line very frequently and i have to repeatedly place multiple orders with the same small amount of stop loss and toward the same trend for a currency pair. With small stop loss, even i catch the right trend for a certain pair and earn significant amount of pips but overall i still having negative profit because i have lost quite many pips from many small stop loss trades during the starting of the trend.
Small can be just as damaging, they can be hard to take emotionally depending on how view loss and the costs (Spreads / commissions) are higher due you paying them more frequently.

Can you give me some guideline on how to set a appropriate stop loss?

Appreciate your help.
With both small and large stops (hard stops, a stop order thats placed) the loss is taken an extreme place from entry at that point in time. Very often, almost always you can aim to take your loss at a better than the level of the stop. Ie you bought at 10 and have a stop at 5, instead taking it at 5 you can wait for the price to hit 5 (your reason to be in the trade no longer exists) then attempt to exit at say 7.
The vast majority of retail traders dont take loss this way, its very controversial on this forum too.

Cheers
D
 

counter_violent

Legendary member
10,646 2,828
A sound theory, and in line with my first point. However, I beg to differ on highs and lows. There’s a reason why the ‘hot money’ is buying in at a certain level, and selling out at a certain level. The ‘hot money’ controls the market. If you can get a grasp on this, you’re onto a winner. I’ve seen it first hand.

All a bit vague and mysterious....can you expand, perhaps with chart examples?
 
 
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