Why we always widen our stop loss when DAY TRADING

21 ago

Very important and basic rule with Day Trading.

Always increase the stop loss when going short (sell) above the original stop loss.

Always decrease the stop loss when going long (buying) below the original set stop loss.

Reason: When the index touches the ASK or BID price (regardless of it actually trading there), it will get you out of your trade and hit your stop loss.

So, don’t be afraid to increase the distance between the entry and stop loss.

As long as the Risk to Reward stays above 1:1.5 – It’s fine.

How much do I increase the distance between the entry and the stop loss?

Notice what the spread is on the contract when you place your stop loss.

So wherever you wanted to put your stop loss originally, add the spread on top of that and that is where you would place your NEW stop loss.

Maybe 20 – 30 points is safe.

But other times it could be up to 50 points