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Please read our disclaimers: Video Why I'm selling the Dax: Recommend Recommend Comment Share. Stop losses are essential in fx trading, as no one knows what markets will do next Traders use stop losses as insurance against being wrong and trading losses There are useful rules of thumb on where to place stop losses By Max McKegg Stop losses are essential in FX trading, as none of us knows what the markets will do next.
Therefore, traders utilise stop losses as insurance against being wrong and trading losses no matter who you are are all part and parcel of the trading experience. One of the challenges facing novice traders is exactly where to place their stop loss. There is no right answer to this question of course, but there are some useful guidelines. Stop losses are useful tools for traders who realise that sometimes it's best to retire to the sidelines on a given trade.
Perhaps the most obvious, is to place a stop loss just under a prior support or just above a prior resistance. Another worthwhile stop loss placement is just under or just above a key mathematical Fibonacci retracement support or resistance, respectively.
Refer to my earlier article Riding the Elliot wave to boost trading success. Such mathematical inflexion points are often found to mark turning points in the direction of the market, in trading degrees ranging from intra-day, short term 24 to 28 hours to medium and long term. Novice traders sometimes use stop losses based on an arbitrary number of trading pips eg. A fixed 30 pip stop loss for intraday trading or 60 point pip stop for short term trading purposes for no technically objective reason.
If you would like an email notice each time Max posts a trade, then click here to follow him. This is mathematically absolutely untrue. I think what Max is saying is this: You enter 10 trades. Relevant articles for you. Disclaimer The Saxo Bank Group entities each provide execution-only service and access to Tradingfloor.
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