Thursday, June 29, 2017

Best Forex Indicator and Stop Loss For every Trade

August 1, 2011 by  
Filed under Forex FAQ & Latest Post


In today forex faq, we shall be discussing the below question from one of our fellow traders.

HI KELVIN. IN THE LONG TERM, WHAT NUMBER IS THE BEST FOR THE STOP LOSS AND ALSO BEST INDICATOR FOR ENTER IN THE TRADE AND EXIT. REGARDS FROM COLOMBIA.

Yesterday I did a check on my website stats and find that the visitors of my blog come from 149 different countries and this makes me feel amazing and ecstatic as I am able to share my trading information with so many people all over the world.

For the above question, I must say that there is no best number for stop loss as it depends on your trading account tolerance. This is what I usually do for my stop loss.

For Example: I have an account with $10,000 and I always trade with a risk of 2% of my account. That means that I will only accept a loss of $200 per trade.

Let says that I see a LONG trading opportunity which means that I will BUY and there is a major support 40 pips away from my entry and I want to use that as my stop loss. I will then do a calculation on the number of lots I can enter with a risk of $200.

$200/40pips = 5 mini lots

I will then enter a trade with 5 mini lots.

For the same situation above, let says that there is a major support 20 pips away from my entry and I decided to use that as a stop loss level. I will then do the same calculation above.

$200/20pips = 10 mini lots

I will then enter a trade with 10 mini lots.

can you see that the key does not lies in my stop loss level, it depends on my account balance and my percentage risk tolerance. There should be a specific number for your stop loss as it should depends on the position of the major support or resistance. What is most important is you have to stick to the amount of loss per trade that you can accept.

As for your question on the best forex indicator for entering and exiting of position. It again depends on your trading strategy. Different trading strategy requires different sets of forex indicators.

However you can take a look at this post that I have written sometime back that talks about reliable buy and sell indicators.

I hope that you will benefit from the answer that I have provided above. If you guys have anything to add, do feel free to give your comment as it will be very valuable to other traders here in this blog.

Comments

3 Responses to “Best Forex Indicator and Stop Loss For every Trade”
  1. Ian says:

    I’m confused by your math. 10 lots x $10.00 per pip is not $200 on a 20 pip loss. Are you using mini lots? 20 pips at $10.00 per pip is $200 per standard lot so 10 lots x $200 loss per lot is a $2000 loss.

    • Kelvin says:

      Hi Ian

      Thanks for pointing this out. It was an example and I was referring to those of you who are starting an account with $10,000. For $10,000, you should only trade with a mini account. For me, I am already using a standard account and I only suggest you to start one with around $50,000 to $100,000 capital.

  2. kristofa says:

    I really did understand now how to manage my account vis, the stop loss, the number of lots and good positioning. Thank you so much

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