What is the safest (but most profitable) way to set a stop loss? - page 6

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The safest and most profitable way of using SL is not using it. Close your trades based on technical conditions or when your entry conditions are not valid anymore. 

Using purely a price distance from your entry is no sense, regardless of the fact you use pips, ATR or SR levels.

You need to watch and analyze how market evolves after you enter a trade, you cannot forecast a price on which your trade should be closed ignoring how market move until that moment.
 
Fabio Cavalloni #:
The safest and most profitable way of using SL is not using it. Close your trades based on technical conditions or when your entry conditions are not valid anymore. 

Using purely a price distance from your entry is no sense, regardless of the fact you use pips, ATR or SR levels.

You need to watch and analyze how market evolves after you enter a trade, you cannot forecast a price on which your trade should be closed ignoring how market move until that moment.
How do you manage your risks without a stop loss when the market moves suddenly?
 
ChelseaRbert1 #:
How do you manage your risks without a stop loss when the market moves suddenly?

See Post #34 for an example of a dynamic exit combined with a fixed fail-safe stop.

The best of both worlds, if you will.

 

I'd it just beyond key structure level tight enough to protect capital. 

 
Ryan L Johnson #:

See Post #34 for an example of a dynamic exit combined with a fixed fail-safe stop.

The best of both worlds, if you will.

Thanks, this was helpful
 
Gtrade:

As from the title, I mean which method has the best ratio safety/profitability for you (support resistance based, atr based, range based, time based etc etc.)

Share your opinion...

If you are using expert advisor:

The ideal SL is about 10-20% above of your long term equity DD. but I assume you carried out simulations correctly with good data.

If you are manually trading,

It depends on the instrument you are trading. Because different instruments has different "trap" levels. By trap I mean, fake breakout and breakdown.

Stop loss is all be about understanding if your are trapped or not by the professionals. Therefore before deciding SL level, you must observe he liquidity zones which are usually depicted by 1h+ lows & highs.

For EURUSD, and if you trade in an appropriate location,

Trap levels usually between 80-150 points. If I trade on a location and if lost exceeds 150 point, I would SL.

 
in my experience,the safest and most logical stop level is few ticks beyond the previous swing high or low before the entry level.If price retest the this SL level,its good to be out of trade as there is odds of weak trend.
 
Fabio Cavalloni #:
The safest and most profitable way of using SL is not using it. Close your trades based on technical conditions or when your entry conditions are not valid anymore. 

Using purely a price distance from your entry is no sense, regardless of the fact you use pips, ATR or SR levels.

You need to watch and analyze how market evolves after you enter a trade, you cannot forecast a price on which your trade should be closed ignoring how market move until that moment.

While it's possible to manage risk beyond stop loss, I don't like the idea of eliminating the stop loss. There should always be a reasonable place to put it, even if it is wide. And you have to have some kind of mechanism to control drawdown if not using a stop loss, otherwise the risk is automatically too high

 

It's going to depend on the strategy and, usually, what your back or forward testing tells you. But at its most basic level, the stop loss needs to be balanced so you don't lose too much when you lose but also positioned where it's hit as rarely as possible.

Everything trading is a balancing act. Like people are always obsessed with Risk:Reward but ultimately that only matters if your stop loss is being hit. I generally stick to 1:1 R:R, just because it's easier to analyze if the system itself is profitable rather than worrying about skewed numbers. But people always complain about the R:R. Ok, fine then, set the SL at half the value I'd use, you'll just kill yourself by a thousand cuts as the SL keeps getting hit. Trades need room to breathe.

And keep in mind, as far as odds go, many things have an equal and opposite reaction. Yeah, you can set your SL so it's 1:1 and have 50% odds, or 1:2 and have 33% odds, or 2:1 and have 66% odds (draw a pie chart if you can't understand this).

Ultimately stop loss only matters if it's hit. 1:1 that never hits SL is more profitable than 1:2 if 1:2 means your SL keeps hitting.

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