METHODS FOR SETTING STOP LOSS. PART 2.

21 dic 2021

We continue to study!

Moving Average method
When choosing this type of stop loss setting, the moving average indicator is used.
The moving averages indicator has long been known in the forex market and many traders use it in their trading, since trading on this indicator is simple and reliable enough.
The strategy of setting a stop loss on the moving average indicator is very simple:
We need to wait for the price to rebound from the long-term average and put a stop below the indicator line, or above it, if we are talking about a rebound down (short).

Fibonacci Levels
In addition to the moving average indicator, Fibonacci levels can help you with setting a stop loss.
These two methods are somewhat similar and both are quite easy to use.
All you have to do is first measure the market phase and wait for the rebound from the Fibonacci levels.
After rebounding and opening a position in the appropriate direction, set a stop loss below or above the 78.6 level.
The simplicity of these methods lies in clear rules, it is difficult to get confused in them, so these methods are effective.

Trailing Stop
A trailing stop is a stop loss that follows the price by a certain percentage, points, or dollar amount when the price moves in your direction.
Thanks to the trailing stop, the risk will decrease, protecting your profit and preventing a profitable position from turning into a negative one.
Usually a trailing stop is set when the price has already moved in the direction we need and in order not to lose profit, we set a trailing stop. But be careful, do not place your stop too close to the price, do not forget about corrections, give the price room to accelerate.

High/Low Method
This method is most often used by swing traders.
The essence of the method is that the stop is placed behind the minimum/maximum of a pre-selected day. In addition, the stop can move if the price shows a new high/low the next day.
This method is considered not the best, but it exists, and you should know about it. Be careful when using.

Conclusion
There are many ways to set stop losses, but which one to choose?
As is often the case in trading, you should choose the method that suits you, your character and your strategy.
Do not forget that excessive stop-loss setting can lead to premature closing of a position. Frequent repetition of this error can lead to the loss of all capital.
Stop loss should not be set at any point you like on the chart, it should be set according to the method and logic of price movement.
Do not forget about volatility, which can knock you out of position, and then turn around in the direction you need.
In addition, it is not necessary to set the stop loss clearly at the support/resistance level. The price often passes these levels and returns back. Don't forget about it.

Setting a stop loss in each position is an important rule. This should become your habit. You should know before opening where you will put your stop loss. Do not forget about the rules, follow them and then you will succeed.

Traders, if you liked this idea or if you have your own opinion about it, write in the comments. I will be glad 👩