" BEST " method to use for Stop Placement ?
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" BEST " method to use for Stop Placement ?

Psychology and Money Management

Created February 21st 2017 by md1933
Updated February 21st 2017 by mastercraft29
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" BEST " method to use for Stop Placement ?

  #1 (permalink)
Posts: 74 since May 2016
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" BEST " method to use for Stop Placement ?

I have been reading through Articles and Forums this morning , and have been trying to narrow down, what the most " Meaningful / Accurate " form of Basing your Stop placement.....is ?

There are arguments for each of the following methods to use, for where and how you should base and place your Stops :

1. ATR ( a Volatility based metric )
2. at the 2 SD level ( Bollinger Bands for instance )
3. Just above the Last Swing High/ below the last Swing Low

I tend to lean towards placing my Stops , Just below / above STRUCTURAL Lows and Highs , and then based on the distance of my Entry to where that Stop placement will be ....... I use the Distance of my Stop , to determine the number of Contracts I will trade , as the goal is to have a Fixed Risk ( say 3% of my account size ) at Risk , on any given Single trade. So that if the Stop is hit ...... I only will lose a predictable fraction of my Account/capital

Wanted to get other Traders thoughts and ideas, as to how they determine where to place their own stops

Looking forward to the discussion

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  #3 (permalink)
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rleplae's Avatar
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If your stops work, based on what you are doing, that makes sense.
I have seen other traders doing similar to what you are doing.

A stop depends on :
- your style
- your timeframe
- your appetite for risk

Keep in mind a stop is a safety, and should not be something that gets 'hit', when the trade didn't work
very often, if not almost, you can tell a trade doesn't work, long time before the stop is hit

It is very easy to click the "close" button, when the trade is in positive ground
the same thing becomes much more difficult once you start to loose on a trade

a lost word : once you start to pray the trade will work it, you are almost sure it will not

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  #4 (permalink)
central florida
Posts: 192 since Jul 2014

i am a price action trader so i believe in using a price action stop. the best for a beginner is below or above the signal bar, allowing for a smaller risk. however if you are a seasoned trader and like to scale in, then using a swing stop is more appropriate (assuming prices are in a trend and swinging). once the price action transitions into a trading range, institutions are buying low, selling high, and scalping and will not use a stop below the most recent swing low (in a bull) since it is likely to get hit. during a trading range institutions are using wide stops and scaling in.

hope this helps!

if you find my post helpful please give thanks for journal challenge. the link is below and i am on the first page.



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