Share your dynamic stop loss strategies

One of the weakest parameters of some trading systems is the stop loss. It serves as an emergency exit when trade goes in wrong direction and losses get too high. Trailing stops diminish returns as well and I've never seen a system where they are a profitable part of a mechanical strategy. For some time I've been experimenting with a clumsy dynamic stop loss calculated on average true range. Basically, if a trade goes in the wrong direction and it appears it won't come back (and no reverse trade has been triggered), the stop loss is there to turn everything off. I say "dynamic" as it is not based on a % of capital or static number of pips, but is calculated based on average candle size at the time of entry and how the average true range is changing over time. However, I need to refine this approach, or better, look for a new concept. We all think about profit stops and the challenge of predicting where price will go, what about stop losses, and predicting where a trade is no longer viable and needs to be killed? Share your ideas!

Use account as stop loss. Average in to positions with increasing lot size and increasing distance to average down. Very rarely does price keep trending in the same exact direction without any pullbacks. Very rarely you'll use stop loss.

If you place a trade where is supposed to be, it should be around the area where it turns back and move in the direction you expect (up/down) almost right away: if this doesn't happen then you enter the market too soon OR it just wasn't going to go where you expected; in other words you should only place trades in the lowest of the low/highest of the high at that given moment in time in the market

THATS EXACTLY where you need to "kill" it

The best is to stick to Stoploss based on the price action, it is advanced to use You must already be committed Good capital management and the reward/risk ratio should be taken care of at least 1.5, In addition to adjusting the stop to the break-even point, You can put the stop below the last Low with strong support level or above last high with strong resistance level.
regards
Ahmed

Stop losses are such a personal thing, each to their own and all that.

But to answer your question, I place my SL at a safe distance to allow for some messing around, knowing that if/when price moves beyond a certain point, I will move SL to break even. If price messes around and doesn't move well, I'd rather be out, and can always get back in if things look good again.

I know a lot of traders think moving SL to break even is stupid, but I don't care, it works for me. I think it gets a bad reputation because moving to break even too early is likely to take a trader out, even on a good trade, so it's a question of when to move it.

It means I can chill and look for other opportunities.

I recently found a problem with putting SL to break even. It has to do with the spread.

Here is the math problem behind it:

When you have a system with f (no SL to breakeven, we just let SL and TP where it was from the start)

R:R of 1:1.2
Plus: 500 pips
Minus: 400 pips
Win: 100 pips
Trades: 20
Spread: 2.0 pips per trade
Spreadcosts: 20*2=40 pips
overall win: 100 pips - 40 pips = 60 pips

Now comes the problem with putting SL to break even: When you do that and the R:R of 1:1.2 would be still the same with that technique /which is often the case).

now we put SL to breakeven after being in plus with position of 5 pips and assume the same R:R:

R:R of 1:1.2 (the same)
Plus: 360 pips (less)
Minus: 300 pips (less)
Win: 60 pips (less)
Trades: 20 (same)
Spread: 2.0 pips per trade (same)
Spreadcosts: 20*2=40 pips (same)
overall win: 60 pips - 40 pips = 20 pips only left !!

The reason behind that is, that the trade amount is the same but the overall profit is lower!! That can even lead to a minus in the end using trail SL to breakeven vs. let the trades run!