Struggling with Stop Loss


Active member
240 2
My 2 pennies worth: yes, stop losses often seem like a lose-lose method. If you set them they inevitably get hit and you lose, if you don't set them the trade just keeps running against you!!

My meagre experience has taught me that setting a stop loss level, and remaining on the profitable side of it comes down to good selection of entry level.

For example, regarding the graph you attached. It looks like you use bollinger bands. I would suggest these are hard to use effectively on 5 min charts.... start with 30 min charts, find the trend then work your way down the timescales looking for a suitable entry point.

You may have wanted to go long where you pointed out on your graph because the price had trended down along the bolly line and had broken back up above the lower line. However, your arrow points to a "dragonfly doji", a candlestick pattern which signifies a turning point.... and after 10-15 more upwards points, the DOW duly plunged again. It never crossed the bolly moving average line to confirm a change in direction.

So basically, you picked a bad entry point in that particular case.

But back to stop losses. Ok, let's go back and presume you're now long from where your arrow points to. Ignoring the fact about looking at longer timescales first to check the trend, and assuming you were hoping for the price to bounce off the lower bolly band and hopefully touch the upper one (to close the trade for profit), I personally would have put my stop just under the low of the black candle sitting on the vertical line - around 10,398.

But, on this short timescale I would have been watching closely to maybe scalp a few points or move my stop up if the reversal was strong.

The other advice here is very good, but I would still suggest for you to research more about good entry/exit signals and then enter trades when everything comes together, ie. trending the right way, RSI rising/falling, MA crossovers and good candlestick patterns etc. This may mean you make less trades, but hopefully they will be more profitable.

All the best.
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