Lately I have this dilemma, where to set stop loss. If we trade sure we will set a stop loss, weather is predetermine, or set it in our mind. As the book “the true turtle” stated, they do not place their stop loss, but have a target in mind. When the target is hit, they will exit the trade.
Set it in mind
This could be the best; we can avoid our stops being hunt by the big players. But by doing so, we need to monitor the price all the time. To pull the trigger to exit takes big courage. Sometimes our emotion will get the better of us and is hard to exit the loss; this will result in greater loss.
Setting the stop closer
Set the stops closer to entry, each time we get stop out, we loose a little. However in this way we will get stop out more often. Placing stops closer to entry also increase the chance of being hunt by big players.
Setting the stop further
Setting the stop further will decrease the chances of them being hit. However having it further means each time it’s being hit, we will suffer greater loss.
Setting stops to previous high and low
These are the favorite place for everyone to put their stops. This also the easiest target for being hunt out by big player / brokers. Setting your stops near previous high/lows with a bit clearance still will be hunted out easily
Setting stops on previous resistance / support
These also few places that easy to be hunt out… giving it a little bit of padding also wont be much help, as price will comes to take your stops and move to your intended direction.
There’s no worse feeling than seeing your lost being hit, and then the price continue to move in your favor. Do you feel that the price purposely comes to hit your stop and than continue to move in the direction you predicted? Setting stops is like an art. I not yet master this art. Hope I can post a more helpful guide on stops in the future. Stay tuned.
