how many pips do you think is safe for SL ?
- Thread starter Peter brandley
- Start date
Why would you put a number of pips as a fixed stop loss? Should stop loss be chosen by entry and exit level? By risk and reward considerations? You should be thinking about placing SL below support, or above resistance accordingly, right? To say it always has to be a number of pips is incredibly short sighted.
As a swing trader using H4, I don't use an SL at all. I wait for the swing to finish and then exit and find a spot to enter the new swing. Swings using H4 go for an average of 7 trading days on EURUSD. The present downswing started at 06-19 and the USDJPY on 06-18, both still going, although USDJPY looks like it might be finished soon.
AUDUSD has been wild lately, so no trades or if, then H1 swings - which would have been very profitable lately but would need a lot of attention, like daytrading. No good for me.
Felix
AUDUSD has been wild lately, so no trades or if, then H1 swings - which would have been very profitable lately but would need a lot of attention, like daytrading. No good for me.
Felix
I am using a SL of 50 pips when I used to trade the 1 hour and 4 hour time frame. On daily time frame I used to set the SL based on previous high or low.
Jason Rogers
ET Sponsor
Hi Peter,
You make a great point that a stop loss should not be based on using a set number of pips. I would add that one should also take into account the spread on a given currency and its volatility. For example, EUR/NZD will need a wider stop than EUR/CHF, all other things being equal.
The main point is, you should not be setting a stop price based on how much money you have in your account. Instead, you should adjust your trade size. For example, if you trade a 1k micro lot, you are only risking 10 cents per pip, while if you are trading 100k, you are risking $10 per pip.
A good rule of thumb is to try not to risk more than 2% of your equity on any given trade. That means if you have $5000 in your trading account, you can risk $100 per trade. If your trade setup required you to risk 50 pips, then you could risk $2 per pip on this trade idea. That would equate to a 20k trade size. On the other hand, if your trade setup required you to risk 200 pips, then you could only risk 50 cents per pip. That would equate to a 5k trade size.
Jason
I am trading forex for 10 years and never had one
Right, stop loss should not be place by just numbers it is necessary trader should analyse first and check the support and resistance level and then place the stop loss which is very important in Forex trading.