A Simple Stop Loss Method

This post is on the subject of where to place a stop loss.

This is a conversation that I had today in my chat room and I feel that the best way to really understand these concepts is to see them explained live or thru a video, which I have prepared for others to see.

When I first started trading, I would read or hear the saying… “don’t place your stop loss where everyone else does”.

I wondered for a long time about what that meant exactly.
How could I possibly know where everyone ones stop loss levels are?

The question that started this conversation in my chat room was, “Why do I get stopped out only to see the price bounce at my stop loss and continue on the direction I was hoping for”?


I figured out over time that there are levels known as psychological levels.
These are (in order of importance)
The double zero… 3500, 3400, 3300 and so on
The 50 level… 3550, 3450, 3350
And then the 20 and 80 levels.

The important thing to remember is that price doesn’t have to hit one of these numbers on the number to work… these are just levels that you should be paying attention to.

Along with being aware of psychological levels… I also use fibonacci retracement levels and pivot points to identify possible areas where price might bounce, and this area usually turns out to be where most people place their stop loss orders.

Something to remember about fibonacci retracement levels… they can and do act as potential levels of support or resistance.

When all of these support or resistance areas line up together, they can create great oportunies to enter in a trade and if you are already in a trade… being able to identify these areas will allow you to correctly identify where to place your stop loss orders.

If you would like to see the video I have explaining this concept , please pm me and I will send you the link.

I hope this information is useful for some of you.

L.C.

I have a question about stop loss. When I buy say the spread is 120.99/121.02. OK what would be my stop loss.
Every time I fill in the stop loss, I always get invalid.
Can you help me on this?

Thanks,
Jonathan

Where are you trying to place your stop if you buy at 121.02?
Have you been using your platform long? Sounds almost as if your not filling in the order correctly.
Does your broker have a rule about placing stops within the spread?
Give us a little more info and someone will get you pointed in the right direction.

Buy is 121.02. I am on a demo, never traded before. I do not have a live acct. and won't for at least a few months.

Thanks,
Jonathan

i think stop loss is for emergency only.....
many say when we get signal for oposite dirrection, close it. (or hedge it)

[ [/quote]


If you get an invalid flag you are probably entering your stoploss on the wrong side of the buy price, or too close to the buy price. If the bid/ ask is 120.99/121.02 your stop has to be below 121.02. There may be a minimum pip differential required between your buy price and the stoploss, depending on your broker. Or maybe your stoploss cannot be entered within the spread--has to be at 120.98 or below. Again depends on your broker's policy.

If that's not the case make sure you are filling in all the fields on your order ticket. Check the online manual for your trading platform and reread the section pertaining to order execution and order types.

If you are asking about exactly where to place your stop, that will depend on your strategy. I haven't seen the link that L.C. mentioned on this thread, but you should PM L.C. and check out the link. Especially since it's the very subject of this particular thread.