Most of the time trader don’t use stop loss for their trades. They don’t want to use it because they think it only gives negative balance to our trades. But in reality stop loss is a great option which save us from blowing up our accounts. It helps a trader to continue his/her trades. So we can say if you want to continue your trades then use stop loss. If you don’t want to stop trading then definitely you should use stop loss into your trades.
How it is helpful for us to use Stop Loss into our trades?
In a high volatility market sometimes our prediction or analysis go wrong. At that situation we may face some losses and it is possible that it go further negative zone. If we don’t use stop loss then it is possible that our account go empty in no time. Better to use stop loss into our account and stay save. It is easy for you to recover your losses with the left amount.
At what level we should use Stop Loss?
This is quite confusing for most of the trader, mainly the new trader don’t know where to place stop loss. Which level is good it is really a matter of concern. So here I want to only suggest, if you think it is good then apply it into your trades.
Use 50 pips as stop loss for your trades. Also calculate it in a way that you lose only 2% to 5% from 50 stop loss. Suppose you’ve 100 bucks use 0.04 lot size as volume. This way you can lose only $2 at 50 stop loss.
If you’re an aggressive trader and use huge volume then I suggest you to use 20 pips as stop loss. Because you shouldn’t risks all of your money into a single trade. Most probably 20 pips is not a good idea but for those who are good at trading may use it for their trades.
50 pips level stop loss don’t work for me. What to do?
Sometimes a trader often get SL hits easily even he put 50 pips as a stop loss level. This happens because a trader don’t able to open trades at correct level. If it happens that you always face SL hits at 50 pips then increase it to more. At the same time you should minimize the lot size (volume). Suppose you’ve increased the SL level from 50 to 100 then you’ve to reduce the lot size from 0.04 to 0.02 (In case you’ve 100 bucks as margin). Risks will be same as 2% here.
Why I often get SL hits?
Because you always open your trades at wrong level. Always try to open trades when there is a good trend. Also consider support for buy and resistance for sell. In this way you’ll face only less negative and it’ll not hit your SL easily.
Do Expert get SL hits?
Yeah of course they also get SL hits. The only difference is that they only face less SL hits compared to others. Most of the expert use small pips level for SL into their trades and always put TP at large pips level. For example if an expert put 20 pips as SL then they use 100 pips as TP. In this way they trade and earn good profit.
Even they face SL hits they earn very good profit. Suppose out of 10 they get 5 SL hits. Here also an expert can earn good. Just calculate it with the above given SL and TP levels.
For example if an expert use 20 as SL and 100 as TP.
Suppose one expert lost 5 trades, which hit SL.
And suppose 5 trades hit TP.
Pips From Profitable trades: 5 x 100 = 500
Pips From SL hit trades 5 x 20 = 100
Total Profit = 500 – 100 = 400 pips
So look at the calculation above an expert can easily earn good income even after losing about 50% of his trades. This is possible because they always set SL to lowest and TP to the highest.