Cons forexcashbackcalculatoref="https://www.fxeastcashback.com">cashbackforexbtctently using any stop method is better than never taking a stop, but once you realize you should stop, you should only use the best stop method you can develop. You can either set your stop to be in sync with the market, or you can set it according to your trading plan needs, but the best way is to find a stop cashback forex fits both. The basic idea of a market-synchronized stop is that your stop is controlled by the market. You never know when you enter, whether the next session will be volatile or flat, whether there will be a breakout, whether there will be a trend, Eastforexcashback whether there will be East forex cashbackecial circumstances (such as a gap). The most adaptable indicator in our portfolio of instruments is the Average True Range (ATR) The classic market-synchronized stop-loss technique is to set your stop as a function of the ATR for the period you plan to hold the position For example, you buy at X and know that the ATR for the period you expect to hold is 60 pips If you set your stop at X-61, the likelihood that you will be stopped out by a large random price movement is very low, but since You can never enter at the exact low and leave at the exact high (and vice versa for short positions), you should probably set your stop by subtracting the ATR from the entry price and then subtracting a few more points - for example, 70 minus 10 This gives you an additional 18% protection for your ATR One function of setting your stop to the ATR is When the market is unpredictable and volatile, the ATR goes up and the stop should be widened to prevent it from being knocked out by random price changes When the market is neat and orderly, the ATR goes down and the stop should be reduced However, there are some problems with the ATR, including but not limited to the fact that 70 points may represent a dramatic price change in your time cycle and this has a significant impact on the Stop Loss Setting #1 Rule #1: Your expected return on each trade should be greater than your stop loss Since your profit margin on each trade is hardly more than the ATR range, how can you set a stop loss level that exceeds that margin? Ideally, the most risk-averse strategy would be to set your profit target as a fraction of your ATR and your stop loss as a multiple of your ATR, but this strategy does not work because it conflicts with Law #1. If you are a short-term trader, setting a multiple of your ATR as a stop loss level is very detrimental, so the solution is to set your stop loss level as a fraction of your ATR, meaning that you are exposing yourself to the risk of random variation if you set your stop loss level using your ATR, you must accept this. Even if you know this solution, you will still sometimes stop at an inappropriate price "Inappropriate" means that after the stop loss, the price is still moving in a favorable direction, but you have liquidated your position. The solution to this situation is to set a re-entry rule after the stop loss, rather than setting a very wide stop to eliminate all stop loss risk. For example, you have reduced your stop loss from a multiple (70 pips) to a fraction (e.g. 2/3 or 40 pips), but the modified stop loss level skips some important chart events, such as the support line, which you would not have gone long in the first place if you expected it to be broken; in that case, why dont you adjust the stop loss level so that it fits the support line? The answer is yes, of course you should, but on what chart event? And how do you resolve the conflict between ATR stops and chart event stops? Before answering this question, consider some chart events. Using multiple indicators you can always set the lowest price of the last 3 periods (or the highest price of a short position) or any other limit as a stop-loss level. It is a "chandelier stop" invented by Chuck LeBeau that attaches the first calculation point to your entry level instead of the high or low of the market Many other indicators have built-in stops, such as moving average intersections and MACD You can also use Bollinger Bands as stops because in Forex there are 1-3 If you add the Parabolic Turn indicator to the same chart, you will see that the indicator gives a moving average crossover point at the same time. On the top right of the chart, the Parabolic Turn hovers between the buy/sell signal and the price curve crosses the 20-time moving average, which is exactly what all trend-following indicators do in range-bound oscillating trades - they fail by generating false breakouts. This means two things: getting more than one indicator validation has always been an excellent skill, especially when they have different algorithms. If we add the Stochastic Oscillator to the combination of the Parabolic Turning Indicator and the Moving Average Intersection, we can get a stop loss signal a day earlier. When you trade within a narrow time window (e.g. 1-4 hours), you sometimes forget to look for perspective as shown below, and it helps to widen the time period. The support line we are looking at is the gold horizontal line that separates the breakout line. We do not expect the price to fall below the gold line and so far this has turned out to be the case. The higher time period provides a horizontal support line as a stop loss level. When the Parabolic Turn indicator intersects the moving average at the next time, you stop out on the other 2 lots but you hold the last lot until the price crosses the gold line Another useful indicator for observation purposes is the Fibonacci retracement series. In the chart below, the 25% retracement is just above the middle line of the golden breakout curve. You may want to adjust your last lot stop to allow some room for a break below both. -After all, the purpose of a stop loss is to limit losses, not to guess whether the pullback did not exceed the 25% retracement line Fibonacci retracement in sync with the hand-drawn support line in 75% of the time The purpose of a stop loss trading plan stop loss is to limit the loss of a trade to a certain amount of money or percentage of money In other words, the number 3 rule means that: the stop loss level should be in order with the trade money In the ATR score example above, we have a stop loss of 40 pips, about $400, which we compare to the total principal. The only way to reduce 40 pips to 2% is to double the capital, but of course, it is possible to trade smaller position sizes If the trader has only $1,000 starting capital, the stop loss of 40 pips is 40% of the capital After two consecutive losses (which happens all the time), the low capital trader has blown his position Starting capital is $1,000 The trader can set the stop loss at 20 pips but the market can move within 3 minutes This is a very hard lesson to learn. Many traders refuse to face this situation, but the algorithm has a hint of a pessimistic outlook - because it only sets stops based on market conditions and fails to take principal into account; before you know it, you have no money left to trade. Of all the mistakes made by novices, this is the most common and fatal one (not using any stops) The problem is that in order to trade Forex with a realistic expectation of profitability and set a reasonable stop loss at 2% of your capital, you need to invest a starting capital of $1,000 or even $10,000 ...... Alternatively, you need to cut your trades to a minimum number of contracts Switching to the shortest possible time period also works as it reduces the average stop loss distance Since you have to enter and exit in a short period of time, this means you cant follow the trend too much which is a shame because the Forex trend can be very clear and thats where the profit opportunities are. The first way is to backtest different stop levels for scenarios that you often see. You will find that when you set the stop indicators to work, the 20 pips stops will work most of the time or rather, they will only work half the time, but adding 1/3 or 1/4 of the indicators will make it work more than 50% of the time. -The conditions may be similar, but they will never be exactly the same Solution Hunt Stop Exhaustion is a strategy used by some professionals As the price hits the temporary bottom (as described in the chart above), there will be a turning point in the retreat and the price curve after the turning point will indicate if the retreat is over Remember, the entry price is the price that really matters If you can enter at the moment the price In the Fibonacci example above, the market is telling you that the move has avoided the 25% retracement level and broken the mid-line end of the curve If it now moves up, you can assume that unless there is new negative news, the market will let the stop-loss level fall in line with the price curve. If you continue to go long the currency, the stop loss distance will almost certainly be much smaller than the 40 pips set based on the ATR stop system In fact, with better luck, it will be in line with the maximum risk of 2%, and this is true even for larger position sizes Some analysts believe that hunting stops occur more often when integer prices or other magic formulas appear although While it is true that the odds of forex prices closing at round numbers are higher than the norm (and the research comes from a number of institutions, including the Federal Reserve), we cannot verify this: round numbers become turning points more often than the norm If you think about it, you will see that since we calculate turning points based on the latest low closing price, these turning points may indeed tend to be round number prices, but you cannot assume that any historical round closing price It is important that you find some basis on the chart for setting your stop loss at a price that is appropriate to both market conditions and your trading plan, and that the primary function of your plan is to maintain the trade and not lose too much principal. Another important solution is the moving stop. A moving stop is a stop that moves closer to the current price as the price moves in the direction of your position. For example, your initial stop is 40 pips, but the price has risen by 20 pips. To protect this gain, you move your stop closer to the new price and reach a position of 30 pips. If you are lucky and have entered an important move, you may be able to move your stop up to the breakout level (i.e. your entry price) and then, if the price continues to rise, you can protect the net gain you have made. For a 15 minute or 1 hour holding period, you will need to adjust your stop every minute and miss most of the price movement in the process. Again, if your starting stop is at any price level and has no correlation to market movement, a moving stop is the ideal solution