Determining the stop loss for your trades

This article was last updated on April 16, 2022

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Determining the stop loss for your trade is very crucial. People start trading without knowing the risk factors. They try an aggressive approach in stock trading and lose a big portion of their capital. If you want to succeed as a trader, you have to realize the importance of taking a professional approach. Most of the time, it becomes really hard when you start learning about the trade execution process. Naïve traders in Hong Kong often work so hard that they forget to learn about the placement of the stops. Without learning to place the stops, it’s really hard to predict the consequences of your trading career. Generally speaking, you might even blow up your trading account.

You might be thinking that learning to place the stops in the trade is not a tough task. This is absolutely true, but for that, you have to develop some critical skills. Read this article to get a clear idea about the placement of the stops.

Support and resistance

You must have a good idea about the support and resistance level. Without the use of the support and resistance level, it’s really hard to make big profits. In fact, you won’t be able to place the trade with a high level of accuracy. But if you learn to deal with the support and resistance level, you will be able to make a decent profit without losing too much money. When you draw the support and resistance level, analyze the higher period. Dealing with the lower period always results in massive confusion. After you find the support level, place the stops just below that level. In the case of a short trade, you need to place the stop just above the resistance level.

Using the candlestick pattern

By learning to use the candlestick pattern, you will able to find the perfect price to buy stocks. In fact, placing the stops will be much easier. You won’t have to rely on the wide stop loss. The professional always relies on the candlestick pattern since it tells them where to place the perfect stop. Though it will be a tough challenge for naive traders, you always use the demo account of Saxo. Open a practice account and start trading with real confidence. If you can make a profit by using the tight stop, you can expect to make a big profit without losing too much money.

Using the indicators

You can also take advantage of the indicators to improve your execution process. At times, the use of the indicators can help you to place the perfect stops at any market condition. But for that, you should learn to select the perfect tool. For instance, you can rely on the moving average of the Bollinger band indicator to place your trades. If you can do that, you can expect to make a big profit without losing too much money. Be safe and follow a conservative technique so that you don’t have to use any wide stops.

Learn from the mistakes

Things will not easy at the beginning. But if you keep learning from your mistakes, you will slowly learn the proper way to place the stops. But never place too tight a stop in any trade as it increases the risk to a great extent. Be safe and follow the conservative technique so that you don’t have to mess up with the trading chart. Rely on the long term goals. However, those who love to trade the lower time frame can do so using the multiple time frame analysis. While doing the multiple time frame analysis never get confused. Give priority to the higher period while placing the stops. Use the minor support and resistance level to trail your stops. Though you will make many mistakes in the learning stage, you can protect your capital by using the demo account. Once you get good at trading, use real money.