Thanks Blackcat about your idea, i also some where read that use ATR(14) as SL but since its daily based ATR its range differ from different currencies , some time 150 pip also, 150 pip setting as SL i am feeling not at all ok. but it can be good for a big size account (may be
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Stuart need your idea on this.
Anu
Hi guys
Some good discussions today about SL placement. This topic is covered in the PAST strategy E-book and in the e-book Nigel advises a stop at the most recent swing or if that is too far away, just above/below the trendline that you are trading the break of.
ATR is a good indicator to guide you about the distance price is likely to move over a certain period of time but for me using ATR for SL with this strategy would not work. The reason being, we are trying to keep our stop losses very tight. Our trade entries are our way of testing the water to see if the market is ready to move in our direction quickly. If it moves in our favour, we get to break even as soon as possible, if you have a wide stop to begin with, then the logic behind that SL is not going to change very quickly and therefore you would struggle to justify moving to BE after the trade moves in your favour only a little way.
We need to remember that the very nature of this strategy is trying to pick tops and bottoms, allowing a trade room to breath should not be on the agenda for a counter trend trade, it is either going to work or it is not, if it doesn't I would personally like to find out quickly so that I can protect my capital and use it to trade a different set up.
For me the tight stop loss is also psychological, I hate having a trade that sits in negative territory, Nigel once compared this to ripping a band aid off, its best to do it quick and get it over with rather than prolonging the pain, I think this is a good analogy.
I like to place a stop at the most recent swing point before the trendline break, if it is too far away, I will either not take the trade or I will try and find another logical level of S/R, possibly horizontal.
I think using wider stop losses should be left to trend following strategies.
Hope this helps guys.
Stuart
P.S not having a great week with my trades this week, hopefully the latter half of the week will prove more lucrative.