How To Set Stop-Loss ” Correctly ” And Increase Your Forex Trading Accuracy

Deciding on a Correct Stop-Loss for your trades can be a very tough task for most….
Especially the newbies and those whom are struggling with their trades.
Setting too tight a Stop-Loss….your trades always get Stop-out unnecessary
….( although you’re right about the trend in the first place )
On the other hand…..setting too BIG a Stop-Loss, you could not achieve a good risk/reward ratio…
….Which result in deficit & yet another losing month for your trading account .
( capital getting lesser & lesser ….month after month )
Sometimes you even thought of  just ” Heck-Care ” about the Stop-Loss and just trade WITHOUT one…
But on the other hand, you’re feeling very fearful and could not trade with a peaceful mind…

What can be done about this problem in your forex trading then ?

Any solution in the first place ?
Of course there is !
And later,  I am going to share ” my way ” of placing a Stop-Loss Strategically for my trades….
- Which has been proven very effective in Preventing Stop-Loss getting hit unnecessary.
In the event that it does get hit, it means I am lucky and protected by the Stop-Loss.
Hence, saving the WRONG trade from draining my account and wiping my capital with the DEFICIT.
Many fellow readers have wrote in to me asking …
…..or rather seeking solution to this issue on Stop Loss setting .
So I actually spent about 3 hours by the pool side typing this article to share with my readers.
( while watching my baby and wife playing in the baby pool …* smile * )
Later I will be sharing my proven technique on How to place a Stop-Loss strategically for forex trading.
It is not a 100% winning kind of technique of course..

Nothing is guarantee in trading game ….and you and me already know that.
However, by understanding and then executing this proven technique on placing Stop-Loss.
I am confident that anyone can avoid seeing their Stop-Loss getting hit UNNECESSARY ……
again and again….

Why is this technique so effective then….Aaron  ?
The reason is very simple here.
Because it capitalised on the ” natural market behaviour ” .
When I am still learning as a newbie, I also face such problem of getting Stop-Loss hit ….again and again…” UNNECCESSARILY ” as well …
And it is by ” finally ” understanding this technique on how to place stop-loss stratetigically…
I then able to see tremendous improvement for ALL my trades…….and my account started to grow exponentially after.
Getting 35-50 pips Stop Loss hit once or twice is not a big issue …as long as good money management
is being used.

HOWEVER….
What if we are talking about 8 or even 10 trades getting hit again….and again…
That’s already over a FEW HUNDRED Pips down the drain ….right !
And only to see the trend goes your way…
In your heart, you would never fail to think about this :
“….IF ONLY I SET MY STOP LOSS 10 PIPS MORE ! “…
You would not get HIT then because the trade rebound and go at least 120 pips the direction
YOU WANT.
The above is a very common scenario (  problem  ) most failing struggling traders face in their
trading indeed…
I knew it….because I have been there once too….* not afraid to confess ! *
But that’s in the past then.
Now with this technique, I am getting very good results.
Because I know the with the ” Unique way ” I set my Stop-Loss, it is PROTECTING my money !
Alright….let me share this exact techique on :

How To Set Stop-Loss STRATEGICALLY…. With You next
Read the entire post for details.
There are many different scenarios that can happen in the forex market - That’s an undeniable fact.
So I can’t possibly show examples for ALL - That’s also understandable right .
But , I will show 3 most common ones.
These 3 scenarios are good for both a Sideway as well as a Trending market.
Hence, I am sure you guys would have no problem executing it for your trades too.
Alright..let’s go !

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The Main OBJECTIVE Of A Stop-Loss In Your Forex Trades

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Just as the name implies…

It is a Stop- Loss !

…. That means if a price can BREACH a certain price level, you would want to EXIT at that point.

If  you go LONG/BUY previously..

Then the Stop Loss would ” SELL ” for you at a certain price point you pre-set…

Nothing more complicated than that.

So to truly fulfill the main purpose of a Stop- Loss….

….. and reap the maximum benefits from it..

=> You Should Only Place A Stop-Loss At A Point That The Price Should Not Breach ! “

And if it gets breached, you would want to get out because there is a high tendency that you’re
WRONG about the direction.

Simple and very very logical right ?

Alright….next , let me show you 3 different scenarios on what I mean by……
” Setting Stop Loss Correctly & Strategically ! “..

( …….And that is in a Crtical ZONE that the price should NOT be reaching ! )

Let’s get started :

” UNIQUE ” Way Of  Setting A Stop-Loss …

( 3 common scenerios for You …)

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Scenario 1 :  Place The Stop- Loss After A Price Pull-Back/ Retracement

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When a trend starts to develop , it would Pullback /  Retrace at some point due to profit taking.

Even if it is just a short term trend in the market, a Pullback/ Retracement would also occur.

( due to profit taking ….)

However, in order to secure high winning trades, I would normally go for the very ” FIRST ”
Pullback /  Retracement though.

As it is more reliable and there are MORE Potential for the price to go further.

Here’s an illustrations to show what I mean :

Placing the Stop Loss slightly below the Price Pullback is indeed a very good strategic location.

That’s because a Price Pullback is a ” turning point “  for any trend to resume.

Even if it is NOT a strong trend, but at least we know that the price is going to move quite a distance in ” That ” direction.

SO….you and me can go in and grab some pips ( profits ) out of this set-up.

And because it is a Pullback that we are taking advantage of here….

Hence the ” Risk/ Stop-Loss value ” we need to use can be minimized too.

Best of both world indeed.

Another technique that I like to use to further confirm that it is a more reliable Pullback is to spot for congruence such as the 61.8% Fibonacci that coincide with the pullback.

If you spot a pullback that you would like to use as an entry point, do make sure that that pullback at least coincides with the 50% or 61.8% fibo level as well.

This would give you further confirmation and of course make it a more profitable set-up to go in.

Just bear in mind that a Price Pulllback is simply a ” turning point ” for the trend to resume in the previous direction.

So basically you are taking advantage of the ” low price ” to get in to BUY again.

( The conventional way of  ” Buy Low…Sell High ” applies )

So much for that….

Next, I am going to talk about a Symmetry Triangle BREAKOUT.

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Symmetry Triangle Breakout

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If you have been trading currency pairs such as the GBP/USD or GBP/JPY..

Then you would also agree that they are very prone to such Symmetry Triangle Breakout too.

Because the LONDON financial market is the biggest around the world and most of the time during the first 2 hours of London Open…

The volatility is extremely high and having spotted such Symmetry Triangle Breakout set-up..

It is a strong hint that both the interests and volumes are very high.

Meaning if it BREAKOUT is to the up-side, then the buying interests and volumes are very high.

So we can go in and grab some nice pips from this volatility.

Another scenario which is very prone to such Symmetry Triangle Breakout is during a major news announcement.

Especially those which carries more weight such as the NFP or Interests Rate Announcement.

So how do You place the Stop - Loss for such Symmetry Triangle Breakout ?

Let me show You the strategy next :

Just like the old saying of  :

“…There would always be extreme peaceful-ness before a catastrophic STORM ! “

This Symmetry Triangle BREAKOUT is somehow the same..

Of course with the latter, it is not a natural disaster though.

But if one is not using proper risk control, he/she might lose a lot of money.

In the above illustration, the symmetry triangle breakout is happening on the GBPUSD

A very volatile pair especially during the first 2 hours of the London Open.

That BREAKOUT candle for this example also happened on the market open as well at 7am GMT.

A Stop- Loss placed just below the level ” before ” the breakout is a good strategic place indeed.

Because with such BREAKOUT, the interests & volume are very extremely high.

So if the price can reverse and breach the level before it breakouts, then it is better for you to EXIT.

That’s the principle governing this set-up.

Now you know. * smile *

Alright, next I will be talking about the 3rd scenario which is also the last one I am sharing here.

And it is the Morning Star candlestick formation !

In the above 2 examples, I am talking about set-ups for an uptrend if you notice.

So there must be a point where the price would Turn Down & Reverse.

This is the nature of any financial market indeed.

That’s why I choose to include a candlestick formation for a uptrend reversal - The Morning STAR Candlestick Formation that is.

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Morning Star Candlestick Formation

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If you have been trading the forex market  for sometime now..

Then the ” reason ” behind the formation of such candlestick might not be new to you anymore.

But for the sake of other newbies, I will just explain briefly here though.

Bear with me for a while ya.

This Morning Star candlestick formation is actually an ” Uptrend Reversal ” pattern.

It is mostly spotted after an up-trend or rather…..after the price climbed for some distance.

If you refer to the picture above, you would notice a DOJI right at the top of the move…

Which basically implies there are indecisiveness in the market.

And soon after, if there’s a Bearish Candle Closed that follows…

Then it can be considered a Morning Star formation.

When that happens, it is a good opportunity to go into the market for some SELLING of course.

The beauty is that it is very reliable and one of the easiest pattern to spot when it happens in the market !

Here’s how to place the Stop-Loss having spotted this formation :

Very direct on this formation as you can see above too.

Upon spotted the Morning Star Formation , just place the Stop Loss above that DOJI.

It is another very strategic location where the price is NOT likely to breach at all.

Why so ?

Because previously at that level, the buyers are not showing any BUYING interests anymore..

Instead, shortly after that….the sellers came into the market and start dominating.

In any trading game, as long as you are following the MAJORITY….

You can ride on the wave and grab some pips ( profits ) and make your account fatter too.

Important points to note here is that :

1)  A morning star formation spotted on a bigger time frames ( such as 4hour or daily ) would be more reliable than the smaller time frames ( such as 5 / 15 minutes )

2)  As this is a ” Up-trend Reversal ” candlestick formation, it means you would be trading the counter-trend too most of the time.

So to increase your odds of winning with this Morning Star set-up, try to combined other congruence such as a Double Tops/ Bottoms  would definitely be good to increase winning accuracy.

3)  Also, if the BEARISH CANDLE BREAKOUT is too huge - Meaning the price has already moved more than 120 pips perhaps, then you might want to wait for the price to retrace/pullback abit first before deciding to commit.

This is to prevent You from using too HUGE a Stop-Loss for that trade.

Achieving a Good Risk/Reward ratio is still paramount here no matter which set-ups you are going for.

Alright, with this, I shall conclude this article then.

Although this technique of ” Setting Stop-Loss “  is not 100% accurate..
But I can confidently tell you that if You can follow the way I place a Stop-Loss as explained above…
Your trading accuracy could also be increased tremendously - Especially when you do not have to worry about getting the stop-loss hit….again and again.
Frustrated to experience that ….I know.
I used to experience that too during my beginner’s days….but once I understand the ” objective ” of placing a stop loss..
Things took a drastic change - For the BETTER of course ! * smile *
Most of the time, these set-ups would not be so ” perfect looking ” and it makes it very hard for you guys to identify is it the set-up / formation you thought it is..
When that happens ?
How…?
Well….just step aside and skip that pair then.
They are more than 15 pairs in your trading platform for you to grab profits from..
So why bother taking risk when it is affecting your judgement and trading confidence ……right ?
Thanks for reading this far.
I hope by now you have understand how to truly place a Stop Loss ” strategically ” for all your trades in the days to come…..
…..and end those days of fearful,frustration ( due to seeing your stop loss hit…again and again ) once and for all !
I shall pen off for now.
Feel free to read other forex trading strategies in my blog ya.