The Stop-loss, how low is too low?

And how high is too high? What general "rule" should I follow when determining the price of my stop-loss? Thanks.

This can be a hard call, but if you're following any of the methods on this forum some may have a stop-loss policy built in.

The other factor is your risk assessment for the trade and how that fits in with your Money Management rules.

If you're not risking more than 1% of your account on any one trade, or 1% on all open multiple trades, then that should give you a starting point.

An example: Your 1% percent rules says that for this trade you can place 4 lots with a 20 pip stop loss, but you feel this is too tight, then you would go with 2 lots with a 40 pip S/L.

At some point, before you enter, you have to decide the likely target for the trade, so now you have your Risk/Reward Ratio. So, in the example above, if you're only expecting a 20 pip gain, you may feel the RRR is too low.

But, at the end of the day the first question you have to ask is 'How much money will this trade cost me if it goes wrong?' Set a stop based on that, and your MM rules, and let the trade run.

Not really the full, cast-iron, answer you were looking for, I know, but I'm sure you'll get some other answers along the way.

Peter

This is not easy to know. I will tell you a few things I have heard and you can take this and make a decision.
There are two things a person may need to be aware of in placing a stop loss.
(1) We hear this on here and other places. It called getting "Spiked Out". Now, I not say this happens purposely. But, it is something a person should be aware of that can happen. IF, and I say IF, a broker does or does not cause this "Spike" is irrelavant. Just know it can happen. AND, it can only go in a wrong direction for so far and so long then it would have to conform to what the Market is doing and go in the correct direction. If not then FOREX would be nothing but a chaotic numbers game like a lottery.
(2) This is similar to "Spiked Out" and may actually be the cause. This is called "Stop Hunting" and it is legal. How this works, is most people set stops at an even number. Say you go long EUR/USD @ 1.2345? You may set your stop @ 1.2325 or 1.2305 this is 20 and 40 pips respectively. The 20 pips is easy for someone to take out with a large order. The 40 pips may be off enough to be safe.
One of the things I watch is information on "Options" mainly the Exoctics like a Double No Touch! Here what can happen, if, a person enter a trade at the wrong time thinking it going up and the price is close to the No Touch payout. There can be a money game go into play. Large amounts of money being drop to move the price from Exercising the No Touch or try to move it to touch the Barrier. This can cause flucuations that can easily Spike out a 20-30 pip stop loss.
OK, this is my Speculations on what may kill a Stop Loss when it too close.
What I do is look at History of the pair during different market conditions to try and have an idea how much it could move. This helps. Most of the time I set a Loss/Limit is when I am in a trade I can not be around to watch. I go do my thing come back whenever and see if I made or lost money.
The amount of money a person has will also determine how much a Stop Loss can be. This why it important to understand Margins and Leverage. Many do not start FOREX with enough Capital. In turn they putting Tight Stops and getting Spiked out under normal market conditions.
I opened a long on USD/PLN back in Augest. I hope to show people something later with this, but, for now the Position does it's thing without my intervention. When I opened this position, after much study, I knew from normal market conditions I needed a 150 pip stop loss which was actually tight!!!! No Limit. As it moved into the money, in time I was able to move my stop loss into money, so, I can not lose, just may not make what I want. OK, now this trade will continue with a 350-500 pip stop loss until it closes on it's own or I close it when and if it hits my "Target" It has to move a lot just for me to determine I can move the Stop Loss and I DO NOT back off the Stop Loss once it is moved!!!
Some people do not even use a stop as they have enough to cover their margin and know, even if it down 100 pips it can move back into money, they not concerned with a day trade but more of a Trend over time that can flucuate 200 pips in that time as it keeps working in their direction.
So, after all this Babbling, I hope you can find a comfortable point to place your Stop and feel you can afford to lose that money, if, it should go against you. I hope you can put together what I have said and have a good understanding what YOU want to do. No one can really tell you this. But, remember, "to tight ain't right". You will watch yourself being "Spiked Out" time after time and then be saying it the broker or whatever, when this may not be the case.