Lets face it the market always does what it wants Eastforexcashback moves in its own way every day East forex cashback a new challenge almost everything from world politics, major economic events to central bank rumors can move the price of a currency one way or another at the snap of a finger This means cashback forex every one of us can be on the other side of a market move rolling up a position in a compromised position is inevitable, but we can control our behavior in that situation We can control what we do in that situation. You can quickly cut your position and stop it or you can keep it open and hope that the market will move in your favor, but of course, if it doesnt move the way you want it to, it can ruin your account and end your trading career instantly. The longer you survive, the more you learn, the more experience you gain, and the greater your chances of success. This makes stop cashbackforexbtc, a trading management technique, a very important skill and a necessary tool in a traders toolbox. Of course it is, so lets get to know the ways to reduce losses! Before we get into the stop loss skills, lets go over the first rule of setting a stop loss Your stop must be an invalid point for your trading scenario When the price reaches that point, it signals to you that its time to get out of the market There are four methods you can choose from: Money Stop Volatility Stop Loss Chart Stop Loss Time Stop Loss Ready? Then lets get started! Lets start with the simplest type of stop loss: the money stop This is also known as a proportional stop loss because it uses a defined ratio of the trading account, assuming 2%, which is the percentage a trader is willing to use to take a risk Different traders have different risk ratios More aggressive traders will take risks with up to 10% of their account, while less aggressive ones are usually willing to take risks with less than 2% of their total account per trade Once the risk ratio is determined, traders use the size of their position to calculate how far away from the entry point their stop loss is, right? Its a good trade for traders to set a stop loss according to their trading plan, right? WRONG!!! You should set stops based on market conditions and system rules, not the amount of stop loss you want we bet youre thinking right now, ha! No reason for that I remember you saying we need to control risk we admit that sounds a little disconcerting, lets take an example remember Zhang San from the position sizing course? Zhang San opened a mini account with $500 and the minimum size he could trade was 10,000 units Zhang San decided to trade GBP/USD because the pair was blocked at the 1.5620 resistance level According to his risk management rules, for each trade, Zhang San was only willing to take less than 2% of the total account to risk 10,000 units of GBP/USD, each point is worth $1 and 2% of the account is $10, so, Zhang San was able to The maximum acceptable stop loss is 10 points, which is what he did in this trade, set the stop loss at 1.5630 but GBP/USD moves more than 100 points per day! He easily left the market with a stop loss even though the GBP/USD was moving very little because his account was limited to the position limit and he set the stop loss based only on the maximum loss he wanted and not on the market conditions of the GBP/USD Lets see what happened next! Zhang San happened to leave the market with a stop loss at the top because his stop was set too tight! In addition to losing the trade, he also missed the opportunity to catch a move of over 100 pips. As you can see from this example, the danger of using a money stop is that it forces the trader to set the stop loss at an arbitrary price level either too close to the entry point, as Zhang San did in this example, or at a position that does not take technical analysis into account in the slightest, even though you know that you can set the stop loss at a price that is going to turn and start moving in your favor (hasnt anyone seen this before?) ), but since youve already left the market with a stop loss, you cant take those points into your pocket! What a bummer! The solution offered to Zhang San is by allowing him to trade 1,000 units of GBP/USD using a micro lot or custom size broker, with a value of $0.10 per pip Zhang San wants to stay within the risk appropriate zone, he can set a stop loss of 100 pips on GBP/USD, within which his losses are less than 2% of his account Now he can set his stop loss according to market conditions, trading system, support resistance, etc. His stop loss is sized by chart stop A more sensible way to set a stop loss is to do so based on the information provided by technical charts Since we trade in the market, perhaps we can base our stop loss settings on the performance of the market…… Makes sense, doesnt it? What we can observe in price behavior is the inability of the price to break through a certain level Usually, when these support or resistance levels are tested again, they have the potential to control the market so that it cannot break through again Setting stops beyond these support and resistance levels is feasible because if the market trades beyond these areas, it is reasonable to assume that breaking this area will bring more traders into the trade, making your Its also possible that these levels are broken and some momentum you didnt realize was suddenly forcing the market to move in this or that direction Lets take a brief look at setting a stop loss based on support and resistance: In the chart above, we see that the pair is trading below a downtrend line and you think this is a good time to set a breakout trade and you decide you want to go long. yourself the following question: Where can you set your stop loss? What situation would tell you that your original trade idea is not feasible? In this example, it makes the most sense to set your stop loss at the support area below the trend line. If the market enters this area, it means that the trend line is not supporting the buyers and the sellers are currently controlling the market. For example, if you are in a swing trade and you know that EUR/USD has moved about 100 pips per day over the past month, setting your stop loss at 20 pips will cause you to leave prematurely whenever there is a small intra-day move that deviates from your trade. As we covered in the previous course, one way to measure movement is to use the Bollinger bands. You can use the bands to get an idea of the current markets approximate volatility. Another way to find the average volatility is to use the Average True Range (ATR) indicator which is a common indicator found on most charting platforms and is very easy to use. For example, if you are looking at a daily chart and you enter 20 in the settings column, the ATR indicator will magically calculate the average movement of the currency pair over the last 20 days or, if you are looking at an hourly chart and you enter 50 in the settings column, the ATR indicator will show you how much the average movement is over 50 hours which is very sweet, huh? This method can be used alone as a stop-loss setting method or in combination with other stop-loss techniques The key is to give your trade enough breathing room to deal with one or another fluctuation in the market before it moves according to your trade settings…… hopefully it will move the way you envision