What is the best method to define Stop Loss? | Forex Factory

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What is the best method to define Stop Loss?

  • #1
  • First Post: Oct 7, 2015 12:35pm Oct 7, 2015 12:35pm
Hello To All

I appreciate if some one can help me to answer my question what is the best method to define the stop loss to trade secure for inter day trader

Thanks And Regards,
Moti
  • #2
  • Oct 7, 2015 2:05pm Oct 7, 2015 2:05pm
I have been trading on a trend, and set stop - loss near the price of maximal/minimal (short/long) point of rollback (stair). For it, I have set trand's lines and make a trend channel to choose a min/max point of oscillations. And then, i budged the stop-loss in accordance with the movement of the trend.
  • #3
  • Edited Oct 8, 2015 10:02am Oct 7, 2015 5:32pm | Edited Oct 8, 2015 10:02am
Quoting Motiram
what is the best method to define the stop loss to trade secure for inter day trader

There's a huge number of options (I could probably list 15 or more, if pressed).

Key point: there isn't a "best" one. Whichever method you use, for each trade there will almost always have been a method that would have been better, on that occasion, with hindsight. Some you win, some you lose. What's worthwhile is choosing a "basically sensible" one that fits your own trading style and is easy to use, and not to expect it to be perfect.

I'm a intraday trader myself, and have at various different times used all of these methods (among others) ...

(i) A fixed SL according to the volatility as defined by the ATR

(ii) A fixed SL, period.

(iii) Trailing the stop manually just above/below the most recent swing-high/low (this has a lot to recommend it, in my opinion, but it's time-consuming and attention-demanding)

(iv) Trailing the stop according to the position/level of the Kijun Sen line three bars/candles earlier (this can really be very good, overall, but it requires (a) some understanding of the Ichimoku indicator-set and (b) using the right Ichimoku settings for your pair's volatility and your chart-speed, and that's a very widely misunderstood subject)

(v) A fixed fraction of the target


The one I'd strongly advise you to avoid, myself, without conclusive evidence that it works better, overall, over a statistically significant number of trades (typically 200-300 trades) is the straightforward "automated trailing stop". This is generally very unlikely to be a good method, IMO. It looks and sounds appealing, but can easily lose quite a bit of money in opportunity-cost, overall. Abandoning those for all but one of my trading systems produced a really significant overall advantage for my everyday trading.
  • #4
  • Oct 7, 2015 5:46pm Oct 7, 2015 5:46pm
2 percent of your balance max.
  • #5
  • Oct 7, 2015 6:00pm Oct 7, 2015 6:00pm
Quoting loureed10
2 percent of your balance max.

How can you recommend position-sizing without knowing the OP's win-rate, profit factor, degree of risk-aversion, and various other factors entirely unspecified in the question asked?!

In any case, he's surely asking about stop-loss positioning/methodology, not position-sizing? Unless I've totally misunderstood his question (which is also possible, I suppose ...)
  • #6
  • Oct 7, 2015 9:22pm Oct 7, 2015 9:22pm
the level that INVALIDATES your entry reason..!
  • #7
  • Oct 8, 2015 10:18am Oct 8, 2015 10:18am
Quoting Xela
{quote} How can you recommend position-sizing without knowing the OP's win-rate, profit factor, degree of risk-aversion, and various other factors entirely unspecified in the question asked?! In any case, he's surely asking about stop-loss positioning/methodology, not position-sizing? Unless I've totally misunderstood his question (which is also possible, I suppose ...)
Thank you Xela, for your reply you are correct I want to know about stop-loss positioning/methodology nothing else, to improve my R:R

Quoting Xela
{quote} There's a huge number of options (I could probably list 15 or more, if pressed). Key point: there isn't a "best" one.
Whatever SL I put trade reach at the SL level hit the SL close the trade in loss than start retrace back to TP but SL is hit and trade is closed, I feel regret I would have placed few pip below.

More curious thing is that whatever TP I Put when trade reach at that level does not close the trade price stop and start dancing and retrace back to SL without hitting TP I feel regret I would have placed few pip below

I use approximate SL or TP what I guess should be there, result Risk/Reward is 5:1 or I have to spend all the time front of the monitor to watch and close the trade when it start showing profit.

Quoting Xela
{quote}
I'm a intraday trader myself, and have at various different times used all of these methods (among others) ...
(i) A fixed SL according to the volatility as defined by the ATR
(ii) A fixed SL, period.
(iii) Trailing the stop manually just above/below the most recent swing-high/low (this has a lot to recommend it, in my opinion, but it's time-consuming and attention-demanding)
(iv) Trailing the stop according to the position/level of the Kijun Sen line three bars/candles earlier (this can really be very good, overall, but it requires (a)...
What method you use to define SL by using AT. Do you use any indicator?

And about trailing the stop according to the position/level of the Kijun Sen line three bars/candles earlier I have no idea where can get more detail to understand that.

I like Forex and want to trade but also i want to spend some time with family which will be possible only R:R improved by mechanizing trades

I appreciate if I all can share his/her idea to improve my R:R

Thanks And Regards,
Moti
  • #8
  • Oct 8, 2015 12:07pm Oct 8, 2015 12:07pm
Quoting Motiram
Whatever SL I put trade reach at the SL level hit the SL close the trade in loss than start retrace back to TP but SL is hit and trade is closed, I feel regret I would have placed few pip below.

Hi Moti - I hear you.

We've all "been there", sometimes.

I used to get that all the time (it felt like), when I tried using automated trailing stops. Which was a great shame, because they sound so attractive and good, in theory!

It means that on those occasions you needed a wider stop. Easy to say that with hindsight, right? Unfortunately, it doesn't necessarily follow that using wider stops all the time will produce a net benefit, though.


Quoting Motiram
More curious thing is that whatever TP I Put when trade reach at that level does not close the trade price stop and start dancing and retrace back to SL without hitting TP I feel regret I would have placed few pip below I use approximate SL or TP what I guess should be there, result Risk/Reward is 5:1 or I have to spend all the time front of the monitor to watch and close the trade when it start showing profit.

I hear you. I think I know why. That's to do with differences between the "bid" and "ask" prices. That can produce some anomalies. (A more common complaint is that people feel their stop-loss is taken out without the price touching it, while the price has to go 1 or 2 pips past their take-profit before it activates.) You just need to get used to your broker/platform and allow for it.


Quoting Motiram
Do you use any indicator?

I don't. I generally use method (iii) on my list above.


Quoting Motiram
And about trailing the stop according to the position/level of the Kijun Sen line three bars/candles earlier I have no idea where can get more detail to understand that.

Unless you want to learn the Ichimoku indicators/trading, it really isn't worth it, just to position stop-losses and trail them manually, and wouldn't help you at all regarding "automation", anyway. I wouldn't recommend it, for you, really.


Quoting Motiram
I like Forex and want to trade but also i want to spend some time with family which will be possible only R:R improved by mechanizing trades

The desire to automate for convenience always raises other problems, in my opinion. You could try to see whether an automated trailing stop is convenient for what you want to do, but it will effectively come at a cost, overall. There just isn't an "easy, right answer" to these questions, unfortunately. Personally, I don't like automation at all, and I trade only when sitting in front of the screen, but I recognise that your circumstances are different from mine. It generally takes a lot of systematic and methodical analysis to find the best answer for your objectives. These things are all statistical/probability functions, and realistically short-cuts cost money, one way or another.

Another possible, longer-term answer for you would be to use the "advanced trade management" functions in NinjaTrader, with which you can do all kinds of clever/sophisticated things, but that isn't going to help you with MT4 (if that's what you use).

Sorry not to be more helpful.
  • #9
  • Oct 9, 2015 2:24am Oct 9, 2015 2:24am
Quoting Xela
{quote} Hi Moti - Sorry not to be more helpful.
Hello Xela, I appreciate your help and time you have spend replaying my question and explaining it in detailed. I am grateful to you

Quoting Xela
{quote} Hi Moti - I hear you. We've all "been there", I generally use method (iii) on my list above.
Xela sure I will try and give it to go your method (iii) Trailing the stop manually just above/below the most recent swing-high/low (this has a lot to recommend it, in my opinion, but it's time-consuming and attention-demanding)

Once again thank you very much for your kind help

Have a great weekend

Regards,
Moti

Just I find another thread "Trading Without a StopLoss" under the link below. Let read it
http://www.forexfactory.com/showthread.php?t=421191
  • #10
  • Last Post: Oct 9, 2015 3:35am Oct 9, 2015 3:35am
Quoting Motiram
Whatever SL I put trade reach at the SL level hit the SL close the trade in loss than start retrace back to TP but SL is hit and trade is closed, I feel regret I would have placed few pip below.
This only feels like it is the case I assure you. Things like hitting SL then turning on a dime stick in your mind. In saying that, if you are putting your stops where all the other newbies are, they will be targeted. Not your personal stops, but pools of stops are most certainly targeted.

Quoting Motiram
I use approximate SL or TP what I guess should be there, result Risk/Reward is 5:1 or I have to spend all the time front of the monitor to watch and close the trade when it start showing profit.
Wouldn't it be nice not to have to sit in front of the monitor

Quoting Motiram
I like Forex and want to trade but also i want to spend some time with family which will be possible only R:R improved by mechanising trades I appreciate if I all can share his/her idea to improve my R:R
Much like the last comment I quoted of yours this comment shows you think that trading is about setting a few orders and walking away and only coming back once your account balance has increased to do it all again. This is not the reality. Trading is a LOT of work. You are competing against some very highly skilled and highly capitalised participants. If you like forex and don't mind losing money on a consistent basis then keep it small and enjoy (you will still get wins here and there, but you WILL lose overall). But if you want an income source then be prepared to put in years of very hard work and still have the very real possibility that you just won't make it no matter how hard you try. After that, yes trading can give you bucket loads of time due to how much you can profit in relatively short sessions.

In answer to your original question, as Xela said, there are a huge number of possibilities depending on your trading style. I myself don't like to use them to exit as I can't generally describe exactly where I would like to get out - it would be nice if it where that easy but the market likes to play games. The only exceptions are if I am fading a very fast moving market or if my exit will be in an area that I think will produce a stop cascade. In these cases reaction time and execution time can cost a lot of pips. I do have a stop in case of loss of connection though, but that is almost never hit.
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