I Don’t Know Where to Place my Stop Loss



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#545: I Don’t Know Where to Place my Stop Loss

In this video:

00:27 – Where should I place my stop loss?

01:18 – This is what most people do – and it’s wrong.

02:44 – Use support and resistance levels. 

03:20 – Always look at round numbers.

04:22 – How big is your stop loss?

06:14 – Attend my Masterclass, Prop Firm webinar and book a call with us.                       

06:37 – Trade through Blueberry Markets.

Andrew. I don’t know where to put my stop loss. Can you please help me? If that sounds like you. Listen up. I’ve got some great information for you. Let’s get into it right now.

Hey there, traders! This is Andrew Mitchem here with video and podcast number 545.

Where should I place my stop loss?

Now, I don’t know where to place my stop loss. It’s a question and a comment that I get all of the time. And it must be something that frustrates so many people because they just don’t know where to put their stop loss. Why to put it at a certain level? And so it creates confusion, frustration, and inevitably leads to losing trades and therefore overall a losing trading performance.

Now, unfortunately, most people out there just don’t know where to put their stop loss because they don’t understand the market or they don’t understand what is happening at that time. They don’t realize there’s a difference between different currency pairs in terms of the amount of movement or different time frame charts or different times of the day, volatility at the time. All these things make a big difference and it’s something that you need to consider when placing a stop loss.

This is what most people do – and it’s wrong.

Now, unfortunately, most people out there who learned to trade through, let’s say, watching some YouTube videos or a few forum sites, they unfortunately make the common mistake of putting their stop loss X number of pips away from the entry price.

Why they do that? Well, that’s what most people tell you you should do. It makes it easier, I suppose. You go, I’m putting this stop loss at 20 pips away. Well, what on earth this 20 pips mean? It’s completely and utterly irrelevant. You know, 20 pips if you’re trading the EUR/CHF is massively different to 20 pips if you’re trading the EUR/NZD as an example.

You know, one doesn’t move hardly anything. Daily range of maybe, you know, 40 pips, the other one moves a lot. Average daily range of 100, 150 200 pips is vastly different. It also depends on what time frame you’re trading, what time frame chart you are trading, because you know that will determine how big a movement is likely to happen at that time in the next timeframe candle.

Use support and resistance levels. 

You know, because sometimes the market’s very quiet. Other times it’s moving a lot. Obviously, if you’re trading on, let’s say, a 4, 6, 8, 12 hour, Daily, you know, it’s going to be a lot bigger candle than if you’re trading on a 15 minute chart, for example. And so you have to take this into account also.

Now, you also need to take into account and things that we do is a support and resistance level is a pivot point in a previous swing, high swing lows and making sure you’re using as many factors as you can to put your stop loss behind that level. So if you’re taking a buy trade, for example, you want to put your stop loss below several factors of safety to give yourself the best chance that the market may fall back towards your stop loss, but it’s not going to take you out.

And then it changes and goes up into your anticipated direction and you get a profitable trade.

Always look at round numbers.

Another thing that we use and you have heard me talking about this multiple times, I think was round numbers now a round number to me is a level that ends in 50 or especially 00. That is a very strong psychological level.

Have a look at the charts. You will find that the price bounces at those levels so often it’s not funny. So if you happen to have a trade that has a stop loss that you can put on a buy trade again below one of those round numbers, then even better because likelihood is the price may come back towards that round number.

Test that level and then move up keeping your stop loss below that level that round number adds another factor, another layer of safety to your trade and another layer of probability that the market will not come down, stopped you out. And you know, how often do you see trades that you go to look at them in hindsight and they just stop you out and then they change and hit your profit target, you know, a few bars later.

How frustrating is that? And I’m sure you’ve experienced lots of occasions when that happens.

How big is your stop loss?

So once you have your stop loss area in place of the level you need, you didn’t need to calculate. This is the only time you really need to use PIPS. How far away that is from your entry price, whether using a market order or a stop order or limit order.

How far away is that stop loss from the price that you are entering the market. Therefore, you then need to know that number because therefore you can then go well, and I’ve got a lot size calculator script that does it simply. You then work out the lot size or the position size you need for that trade according to the stop loss of that trade.

And it’s also according to a few other things. One, it’s the pair that you’re trading because of course different pairs pay different amounts per pip of movement. It also is determining by your account size and the denomination of your account. If your account it’s in British pounds, it’s going to be different number than if your accounts in New Zealand dollars or US dollars, for example.

So you’ve got to know all that in order to calculate your risk size. Now. Well, that sounds potentially a little bit complicated and confusing, and you go, that’s just too hard Andrew. No, not at all. It’s simple and it just takes literally like a number a few seconds to drag the script on I put a link to it, by the way.

So if you don’t have it, you can use an MT4 or MT5. You lite