Wednesday, August 23, 2017

Are You Tired of Being Stopped Out

November 19, 2010 by  
Filed under Forex FAQ & Latest Post


I hope that you enjoy this forex faq session like I do. However I find that you guys seldom give your comment on forex faq post and sometime I start to think that there is no one interested in this section but ME. If you like this session, do try to give your comment below.

Here is the question from one of our fellow traders.

The trend is spot on (up/down) but my trade is always being stopped out usually after two to three candles. I can’t help thinking that we are fooled by the system. The system just ‘eat’ literally ‘digests’ your trade and then move to the direction of the trend. The question is how are we to know that the stop loss is at a level that is good enough that will not be stopped? Too high an amount will made the trade not viable (too costly).’

This is something that is pretty common among new traders. In fact, this is also something that used to happen to me when I am new to trading. As a new trader, most of us have the problem with placing stop loss and some of us may even want to give it a miss.

The reason why some of is will want to give it a miss is because we constantly find ourselves being stopped out by the market and worst of all, the price later moves in your expected direction and all you can do is to watch the profit slips away. In fact, something you may think that the market is trying to go against you.

Below is usually how I place my stop loss:

1) One place that I usually put my stop loss is recent swing high or low. If I am going short, I will usually place my stop loss at the most recent swing high. This is because if the market manages to move higher than the most recent swing high making a higher high, there is a high chance that the market will stay to move up.

Most Recent Swing High

Outcome

2) Another place where I love to place my stop loss is at nearest Fibonacci or Pivot levels. These are levels that have strong support or resistance and if the market manages to break through it, there is a high chance that it will continue.

Pivot Point Stop Loss Placement

It sounds to me that your problem may not be just on the stop loss, you could be having a problem with your entry. Your problem could also be you have entered your trade too early. Other than targeting your stop loss placement, maybe you can start to focus on fine tuning your strategy so that you can have a better entry.

You can do that with either adjusting your indicator or observing candlestick pattern.

One thing I will also like to advice you is to avoid a trade when you find the stop loss is too costly. If you have to risk 40 pips to make a profit of 25 pips, this is not worthwhile. Therefore if you find the stop loss is too much, you would rather give the trade a miss than risk losing so much on a single trade.

Remember this: The number one thing you should do as a professional trader is to protect your capital.

Comments

7 Responses to “Are You Tired of Being Stopped Out”
  1. piortwe says:

    Hi Kelvin,

    I found your site by surprise when I was searching for info about forex. I’m a newbie and I like your site very much. Your article is easy to understand and you has done a great work by highlighting common error/problem faced by forex newbies. Please keep up the good work especially this FAQ section as I found it very inspiring.

  2. wole says:

    Hi,

    i have really been diligently following your write ups, and it had really enhanced my trading attitude. please keep up the good work. you are really making good impact in the life of newbies like me.

    i will like to know the importance of Pivot ploting as compared to bollinger bands. what whould recommend for someone like me who is just coming up. And please give more information on how you combines your indicators to maximaze your profits and minimize losses.

    thanks,

    Wole.

    • Kelvin says:

      Hi Wole

      I cant really tell that who is more important as it depends on your trading strategy. What I can share with you is that the pivot point are area of strong support and resistance and you can make use of it to enter or exit your position. As for the Bollinger band, I usually use it when I am trading breakout. Besides that, I don’t really find it useful. (That is my personal view only).

      To minimize loss, you need to make use that you only enter trades with losses that you can accept, let says that you see a trade but the stop loss is about 50 pips which is far from what you can accept, you should always give it a miss. As for the profit, always stick to your set target and do not exit your trade earlier due to fear.

  3. Dr Julius Ssemakula says:

    Hullo Kelvin
    personally i like this blog and dont say that we dont read it or we are not interested. Your actually insulting me in person because i am always waiting to read through, though sometimes i dont comment because as i am reading all i am thinking about is how to practice what my teacher is teaching me.
    My question about this particular one is that how about if my i only have to risk 3% of my trade according to my plan and yet the S/L level according to your method risks more than 3% of my account. Do i always have to ignore that trade and stay out

    • Kelvin says:

      Hi Dr Julius

      I am happy to know that you are finding this session very useful for you.

      Regarding your question above about the risk per trade. If you ever find the risk of any trade to be more than what you are willing to risk, you should always avoid taking that particular trade. As a trader, we would rather miss a trade than lose a trade.

      • Mike says:

        Hi fellows,
        Kelvin is right. Not every trade that comes need to be taken. only profitable ones please and since if we are also using the candlestick reversal to trade, we will more likely enter the trade at the close of a candle. Where we have the S/R nearby, the risk/reward may just work out to be <1.

  4. Marco says:

    I’m a forex newbie and your tips are gold for me! Really thanks, Marco

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