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Stop Loss - Any Good?
Yes, it certainly is.
Stop loss
is essential as part of the
money
management and risk control in currency
trading. You've probably read
something like this elsewhere:
Don't fight the trend.
Don't be wishful thinking - hoping
the market will reverse and go your way.
Limit your loss and preserve your
trading capital.
I still don't feel good when I take a
loss; however, limiting your losses per
trade allows you to stay in the market
in a long run. It also helps you
clear your mind and take a fresh look at
the market. It's our human nature
to be worried and not be able to think
straight when a trade has lost so much.
However, it is also wise not to set
the stop loss too close to your entry
point. I have read some posts that
stop losses always got hit because they
were only 10 or 15 pips away from the
entry point. A little whipsaw
especially during news event or critical
announcement, you are out of the market.
There are some good strategies to set
up stop losses such as the support and
resistance levels, the
Bollinger bands,
or the
Fibonacci levels. I
personally like to set it where I can
limit the loss within the 3% range of
total trading capital. These are
all personal preferences. Keep in
mind that leave some room between the
stop loss and entry point so the trade
doesn't get stopped out easily.
Last
Updated:
Sunday, October 07, 2007 10:27:35 AM -0700 |
