A logical method of stop placement

Trading is a game of probability. This means every

trader

will be wrong sometimes. When a trade does go wrong, there are only two options: to accept the loss and

liquidate

your position, or go down with the ship.

This is why using

stop orders

is so important. Many traders take profits quickly, but hold on to losing trades – it’s simply human nature. We take profits because it feels good and we try to hide from the discomfort of defeat. A properly placed stop order takes care of this problem by acting as insurance against losing too much. In order to work properly, a stop must answer one question: At what price is your opinion wrong?

Hard Stop

ATR % Stop Method

Figure 1

Source: FXTrek Intellichart

Multiple Day High/Low

Figure 2

Source: FXTrek Intellichart

Figure 3

Source: FXTrek Intellichart

Closes Above/Below Price Levels

Figure 4

Source: FXTrek Intellichart

Indicator Stop

Figure 5

Source: FXTrek Intellichart

The Bottom Line

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