Stop loss and target profit

How To Set Your Stop Loss and Target Profit

When I am new to trading, I often have this question in my mind. In fact, I have been receiving emails from readers of this blog asking me about the above questions as well. Therefore I will like to take this opportunity to share with you in the form of a blog post here. What […]

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    When I am new to trading, I often have this question in my mind. In fact, I have been receiving emails from readers of this blog asking me about the above questions as well.

    Therefore I will like to take this opportunity to share with you in the form of a blog post here. What I am sharing here is how I place my stop loss and does not mean that this is the best way to do it. In any case, if you have a method to share with us, do feel free to give your comment below as it will be very useful for other traders here.

    So here are 2 ways that I use to set my stop loss and target profit:

    1) Fixed Stop Loss Method

    In this method, I will set a fix stop loss for each trade that I do. This method is applicable to those strategies that I have traded for a long time. Since I keep a trading journal that records the maximum draw down and extension of a trade, I will then choose an optimum stop loss and target profit for each trade.

    For example, when I trade the forex piggyback strategy, I will fix the stop loss to 30 pips and target profit to 90 pips when the trend is very strong. For normal trending market, I will set the stop loss to be 25 pips and target profit to be 50 pips.

    How I get this number is through hundred of trades that I have taken and from the data that I have collected, I find that I make more profit with this settings.

    2) Most Recent Support and Resistance Method

    Another method that I use to set the stop loss and target profit for my trade is using the most recent S&R levels.

    For example, I have entered a SELL trade now. When I take a look at the most recent resistance level, I will then set my stop loss to that level. Now that I have determined my stop loss level, I will then measure the amount of pips from my entry to the most recent resistance. Let says that the value is 21 pips.

    If the strategy produces a 1:2 risk reward ratio per trade, I will then set the target profit to 42 pips.

    Stop loss and target profit

    The above are 2 ways I set my stop loss and target profit for each of my trades. I hope that this information is of help to you.

    Do feel free to give your comment below regarding this topic as it will be very useful for other traders here in this community.

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