How do I know where to put my stop loss/take profit?

[Bradleyule]

When I'm buying/selling how do I know where to place my stop loss and take profit? Should I use the price range of support and resistances to do so?

Any information is appreciated, thanks.

 

[Lúidín]

What symbol are you trading, or is this a general question?

Will also need a figure for how much trading capital you have, or expect to have, in your account?

Lúidín

 

[tomorton]

When I'm buying/selling how do I know where to place my stop loss and take profit? Should I use the price range of support and resistances to do so?

Any information is appreciated, thanks.

The general rule is always use TA to identify where to put both. Put your stop just beyond a level at which the picture that identifies the reason for going in changes to a reason to stay out. If your selected stock / market doesn't indicate both exits on its chart, move on to the next one. But take profits target is harder to identify as sometimes its into clear blue sky, nothing in price history to identify a potential s/r level, in which case, your guess is as good as mine.

 

[NVP]

When I'm buying/selling how do I know where to place my stop loss and take profit? Should I use the price range of support and resistances to do so?

Any information is appreciated, thanks.

most generic trading approaches look at Support / Resistance levels above below the chosen entry and suggest you go just past that as a stop

adjust your stake to equal that stop loss range = the 1-2% you are risking

basically the REAL secret to stops is not to hit them .........use them as hard stop spike safety nets ........good traders can see when a trade has gone wrong inside the stop and bail saving a few bucks ....soft stops ......

when you are wrong you are wrong.........make sure your trading strategy gives you that feedback as rapidly as possible

and if you don't know when you are wrong............boy have you got the wrong system !! :smart:

N

 

[dbphoenix]

good traders can see when a trade has gone wrong inside the stop and bail saving a few bucks

when you are wrong you are wrong.........make sure your trading strategy gives you that feedback as rapidly as possible

This can't be emphasized strongly enough. Traders must determine in advance just exactly what will show them that they were and are right and exactly what will show them that they were and are wrong THEN have the discipline to act on their criteria. Instead what most traders do is place their stops for whatever reason then tell themselves that that's enough. And when the trade doesn't take off immediately after it's triggered, their anuses clamp shut and they begin to sweat, often/usually exiting the trade without waiting for price to hit the stop they so thoughtfully placed. Then of course price does take off as expected and they've become nothing more than spectators. Again. So they vow that the next time they will leave it the hell alone and of course their stop is hit. And price changes course and takes off in the desired direction after all. So the next time they widen their stops. One can see where this leads.

The simplest solution? Testing one's presumptions in order to determine what constitutes a high-probability trade and what only gives the appearance of being one. The "problem" of stops and stop placement then becomes secondary, if that.

Put in an order at a spot that would confirm the highest probability of a change in the balance. Then wait for the market to define itself. If your order is filled, put a stop where the market shouldn't be to confirm that your trade is still valid. "What is a valid trade?" you ask. One where the highest probabilities for price movement are in the direction of the prevailing force. (Douglas)


Db

 

[Fugazsy]

taking profit and placing stop losses is an art form and using them in a rigid way for all the market conditions it will not be fruitful.......for example if you enter a long trade in a running market and as soon as you enter market stalls for quite a while your rigid RR of 1:3 has less chances to be reached....and here the appropriate measure needs to be taken....If the market is moving in a tight range you will be foolish no to take at least some at the other end despite your plan ...... When market is moving fast it might be wise not taking any profits at all till the end of the day....if you have enough stamina....

So my advice to you is always give weight to the market conditions and adjust to it, of course good money is made on good RR, but market does not care about your plan and you need to learn how to read it and act appropriately.

 

[Bradleyule]

What symbol are you trading, or is this a general question?

Will also need a figure for how much trading capital you have, or expect to have, in your account?

Lúidín

More of a general question but I am using a demo account at the moment selling 0.10 on gold.

 

[Bradleyule]

The general rule is always use TA to identify where to put both. Put your stop just beyond a level at which the picture that identifies the reason for going in changes to a reason to stay out. If your selected stock / market doesn't indicate both exits on its chart, move on to the next one. But take profits target is harder to identify as sometimes its into clear blue sky, nothing in price history to identify a potential s/r level, in which case, your guess is as good as mine.

Okay so would you recommend using MACD in conjunction with RSI for the TA? I have learnt them both although they are both oscillators and I'm not sure if its a good combination. Instead of a take profit then I can just adjust the stop loss as the position I am holding increases in profit.

 

[Bradleyule]

most generic trading approaches look at Support / Resistance levels above below the chosen entry and suggest you go just past that as a stop

adjust your stake to equal that stop loss range = the 1-2% you are risking

basically the REAL secret to stops is not to hit them .........use them as hard stop spike safety nets ........good traders can see when a trade has gone wrong inside the stop and bail saving a few bucks ....soft stops ......

when you are wrong you are wrong.........make sure your trading strategy gives you that feedback as rapidly as possible

and if you don't know when you are wrong............boy have you got the wrong system !! :smart:

N

So basically make sure my stoploss is at a point where I will lose no more than 1 - 2%? By spike safety nets I assume you mean a random buy/sell of that couldn't be predicted right?

Am yet to develop a strategy i'm learning indicators to find out which ones work well with each other and suit me. Do you have any recommendations on good indicators combinations?

 

[Lúidín]

More of a general question but I am using a demo account at the moment selling 0.10 on gold.

How much can you afford to put into a trading account..money you can afford to lose

Lúidín

 

[tomorton]

Okay so would you recommend using MACD in conjunction with RSI for the TA? I have learnt them both although they are both oscillators and I'm not sure if its a good combination. Instead of a take profit then I can just adjust the stop loss as the position I am holding increases in profit.

No, I would not recommend any off-chart indicators and never look at them. I look solely at price in various formats and time frames and at total of 4 moving averages to confirm trend.

The initial stop can be identified from your TA on entry but after that its more a matter of personal risk tolerance / greed / fear.

Another classic approach is to move your stop to your entry point as soon as price has built up a gain equivalent to your risk. Your trade is then "free" and you're not risking anything even if it retreats all the way to your entry and beyond. You could even add to the trade when it gets to this point, but keeping the same risk - now you are risking the same in money as your original plan but you have a position twice as large which could make twice the profit for the same points / pence move.

Exits are such a difficult area, there are ways of doing it but we're each only happy with one or a few techniques once you've done it for real. Apart from anything else. you have to learn what it feels like to be that trader with a stop set, but its the middle of the night and you're trying to sleep.

 

[BricksNPips]

well first i would say you have to identify a good trading opportunity. for me, this would be a signal candle in a daily swing level (in an established trend at a retracement point). once i have done this, i look at the weekly chart and make sure that i have my s/r levels marked well. to choose stoploss, i make sure to set it behind the signal candle's high/low, plus a little extra for safety. for take profit i usually shoot for 3 times my risk, making sure i have room before running in to my next s/r level.

 

[Bradleyule]

How much can you afford to put into a trading account..money you can afford to lose

Lúidín

I am on a practice account using $3000 and have no intentions of using real money till I understand the ins and outs of everything possible. I will also most probably only start with a small amount like £500.

 

[Bradleyule]

No, I would not recommend any off-chart indicators and never look at them. I look solely at price in various formats and time frames and at total of 4 moving averages to confirm trend.

The initial stop can be identified from your TA on entry but after that its more a matter of personal risk tolerance / greed / fear.

Another classic approach is to move your stop to your entry point as soon as price has built up a gain equivalent to your risk. Your trade is then "free" and you're not risking anything even if it retreats all the way to your entry and beyond. You could even add to the trade when it gets to this point, but keeping the same risk - now you are risking the same in money as your original plan but you have a position twice as large which could make twice the profit for the same points / pence move.

Exits are such a difficult area, there are ways of doing it but we're each only happy with one or a few techniques once you've done it for real. Apart from anything else. you have to learn what it feels like to be that trader with a stop set, but its the middle of the night and you're trying to sleep.

Okay what time periods do you use on your MAs? I have also traded with them on my practice account using 50, 100 and 200 but couldn't work out points of entry. Do you then work out the S/R price ranges and enter when one is breached?

 

[Bradleyule]

well first i would say you have to identify a good trading opportunity. for me, this would be a signal candle in a daily swing level (in an established trend at a retracement point). once i have done this, i look at the weekly chart and make sure that i have my s/r levels marked well. to choose stoploss, i make sure to set it behind the signal candle's high/low, plus a little extra for safety. for take profit i usually shoot for 3 times my risk, making sure i have room before running in to my next s/r level.

Okay I see, so how do you decide what a retracement point is? Is it when the market is in a stair step pattern like in the picture you posted. But then how can you tell when the market has hit it peaks or its low.

 

[tomorton]

Okay what time periods do you use on your MAs? I have also traded with them on my practice account using 50, 100 and 200 but couldn't work out points of entry. Do you then work out the S/R price ranges and enter when one is breached?

I use 50 and 200EMA to identify underlying trend - if the 50 is above the 200 and price is above the 200 and has risen over the last month, that's a pretty good indication of an energetic uptrend. I rarely go long if price is below the 200.

After that, you can use any handy signal that suggests continuing buying pressure - a hammer after a downleg, a bullish candlestick that is clear above the 50SMA and closes less than 25% off its daily high, a higher range daily bar that closes above the previous day's high after at least 3 consecutive lower range days etc. etc. There are dozens and to be honest, I don't believe any one of them possesses any kind of magic - even price is just an indicator.

At the heart of it all, you can't know which move will continue and which will sputter as soon as your trade is placed. Going with the trend will help. As will avoiding overhead resistance or round numbers. TA off-chart indicators are often portrayed as the gizmo that only gets you into a sure thing: fear of loss is behind this sales technique. For me, building something into my systems that is there to treat a side-effect of doing business is just a distraction and a distortion of my plan. Losses come with the territory and they're not the problem.

 

[Bradleyule]

I use 50 and 200EMA to identify underlying trend - if the 50 is above the 200 and price is above the 200 and has risen over the last month, that's a pretty good indication of an energetic uptrend. I rarely go long if price is below the 200.

After that, you can use any handy signal that suggests continuing buying pressure - a hammer after a downleg, a bullish candlestick that is clear above the 50SMA and closes less than 25% off its daily high, a higher range daily bar that closes above the previous day's high after at least 3 consecutive lower range days etc. etc. There are dozens and to be honest, I don't believe any one of them possesses any kind of magic - even price is just an indicator.

At the heart of it all, you can't know which move will continue and which will sputter as soon as your trade is placed. Going with the trend will help. As will avoiding overhead resistance or round numbers. TA off-chart indicators are often portrayed as the gizmo that only gets you into a sure thing: fear of loss is behind this sales technique. For me, building something into my systems that is there to treat a side-effect of doing business is just a distraction and a distortion of my plan. Losses come with the territory and they're not the problem.

Okay I kind of understand. Is there any resources you could recommend to me so that I can learn it all further?

Thanks for your help so far, appreciate it.

 

[tomorton]

Okay I kind of understand. Is there any resources you could recommend to me so that I can learn it all further?

Thanks for your help so far, appreciate it.

Sure. I'd really recommend -
Marc Rivalland on Swing Trading, Marc Rivalland
Street Smarts, Connors & Raschke
titles on candlesticks or chart patterns by Thoas Bulkowski (or see his thepatternsite.com)
The Ultimate Trading Guide, Hill, Pruitt & Hill
The Master Swing Trader, Alan Farley (but only after the above)

But there are numerous others to pick from according to personal taste / style.

 

[Bradleyule]

Sure. I'd really recommend -
Marc Rivalland on Swing Trading, Marc Rivalland
Street Smarts, Connors & Raschke
titles on candlesticks or chart patterns by Thoas Bulkowski (or see his thepatternsite.com)
The Ultimate Trading Guide, Hill, Pruitt & Hill
The Master Swing Trader, Alan Farley (but only after the above)

But there are numerous others to pick from according to personal taste / style.

Okay thanks for all the advice!

 

[tradesnprofits]

for starters i usually use support and resistance level for my SL.