Lesson 11 how your stops get hunted and what to do about it. Welcome to Lesson 11 My name is Sam ADA. I'm a global macro Currency Trader in the owner of FX renew calm. This is the advanced forex course for smart traders. market was it Bruce kovner said when I enter a position I have a predetermined stop. That is the only way I can sleep.

I know when I am getting out before I get in. Have you ever had your stop hurt or what turned out to be the low? Was it just bad luck? Or is there something more at play? The chances are that actually is forex trading is a zero sum game. One person's loss is another person's when you can beat that strong players with more information, more money and the ability to move the market out to get as much profit They can.

This means that retail players left holding the weak hand. I will stop losses are better watch out, but the dealers can be beat by sidestepping trips and learning how to place your stop loss in places that are difficult to hit, you could add significantly to your trading bottom line. The first step is to understand dealing ranges. gerbil foot said, the most important thing is to have a method of staying with your winners and getting rid of your losers. Handling dealing ranges influence the price dealing ranges drive market behavior. A dealing range is simply a high and low for a trading session or a time period, such as a day, week or month.

Dealers use these labels to work out their orders and manage the positions. You can see here examples of dealing ranges on the 15 minute chart of the year. USD, the arrows denote dealing ranges. Dealing ranges exist on multiple timeframes. They are imprecise. The edges of the range are often pierced in the levels the deal is used for reference are fluid, you will notice an old dealing range will often form the basis for a new dealing range by their active support and resistance levels.

This is a type of market structure that is tradable and can provide you with an edge. In this chart, you can see how old dealing ranges are used as reference points for new ranges. everywhere where is marked with a red dot, this is the case. traders who are taught to put their stop losses behind support and resistance levels will often put their stop loss orders behind dealing ranges. The problem for those traders is that their stops then become a target for those who want to be on the Other side of the trade at that price. This is true of any major level.

On this chart I've marked with red dots were a move is taken out of stops before reversing above or below, either dealing range or support and resistance level. You can see how often your stops will be taken out if you're not careful about your entry or where your stop loss was placed. The solution is simple right? widen your stops and don't put them so close to the edge of a dealing range. Not so there are other factors to consider first. Market wizard Martin Taylor said I'm wrong all the time.

If I can be right 60% of the time and when I am right I have some big winners. And when I am wrong, I staunched the losses quickly. I can make a lot of money. Tight stops improve the rest award ratio of your trades. When you do when you will make more with a tight stop. If you risk the same amount, but what stops can improve the quality of your system.

If you have a wide stop, you will in general, improve your winning percentage. Increase your flexibility when managing your trade. If your stop is further from the market, it will give you more latitude on your entry. If you get the general direction right, but not the exact timing, a wide stop will allow the market to move against you a little before settling in your general direction. This means that you won't on average have more winning trades than if you have a tight Stop. Stop losses are inextricably linked to your entry strategy and trade objectives.

Your stop loss should be a logical extension of your entry strategy and the objectives you have for the trade. For example, if you're a trend follower looking to catch a breakout, you might have a tight stop loss that you expect to get hit more often than not. Or if your goal was to have a three to one risk reward ratio in your trades, you would have a tie to stop them. If We're going for one to one. Logically choose a stop that fits holistically into your trading strategy, psychology and stop losses. losses can be difficult to take as traders like to be right and would prefer to avoid taking losses.

The trick is not to associate loss with failure. Instead, it's important to see a loss as a cost of doing business by the results of any one trade don't matter. Rather, it is a distribution of outcomes over a series of trades that matter. In other words, you will win some and lose some, and it is what you end up with overtime that matters. Some traders even find it helpful to think of trading as a game. Another psychological challenge with stop losses is that the more losses you have in a row, the less confidence you'll have in your system.

The next trade after a big loser will be more difficult to take, even if you know over the long run that your system performs profitably. When you deliver your stop loss strategy, you need to consider your ability to continue to execute your system, even after a series of losses. If your stop losses are too tight, then even if you do have the occasional big winning trade that pays for your losses, you might find it challenging to continue to execute your trades in the face of this series of losses, market types and stop losses as the market types shift and change sociate your approach to the market. This goes for stop losses to consider whether your stop loss placement is suited to the current market type. In addition, be prepared to change your strategy for your stop loss if the market type changes during a trade market was it Michael Platt said when I am wrong, the only instinct I have is to get out.

Superior options for stop loss placement. You make consideration for stop loss placement are the dealing range the risk reward ratio, the entry and trade objectives, the market type, and when your idea is proven wrong. Understanding this here are some different strategies for placing stops that you can help to improve the profitability of your trades. Classic support and resistance stop loss. The classic place for forex traders to play stops behind support and resistance levels. Just be aware of the stop hunting intentions of those participants who can move the market.

You could put your stop say seven to 25 pips behind the level, which will help you to avoid some of the source. But remember this will impact the risk reward on the trade. Check it out stop loss. This is perhaps a smarter way to place your stop loss. Wait until after the stops have been handed in the price has reversed before you enter in place your stop loss either directly behind the support or resistance level or even slightly inside it to improve the risk reward on the trade. On the following chart.

You can see how once a stops taken out with is the Thin Red Line, it is safe to place your own stop loss. The thick red line indicate a stop loss indicator stop losses can be quite useful for three reasons. They give you a consistent place to put your stop that requires little discretion. They are or should be relevant to your entry and trade objectives. And the stock will not be in the usual place that other market participants are targeting. For example, you could put your stop loss on the hundred period moving average, like in this example on the 15 minute chart of the USD yen.

The media stop loss to avoid being stopped, panted a media stop losses just the ticket media stops I see it far enough away from the edge of the rage to make it difficult for it to be heard. In addition is your stop is likely to be on its own and not grouped with a bunch of others. There'll be a little point and others going for it anyway. Media stops work best when trading directly off support and resistance levels. You simply place your stop far enough away from the dealing range that it will look like it is hanging in midair away from the action. A special note on breakeven stops, breakeven stops are a hot topic for traders.

There are both pros and cons for breakeven stops. Only you know what is right for you. On the one hand and breakeven stop as a powerful psychological tool and ensures your winning trades don't turn into losing ones. This means that your winning percentage will increase which can make it psychologically easier to follow your system and trade mistake free. On the other hand, if you move your stop loss to break even, you may end up putting a stop in an illogical place that the dealers can easily go for. In my experience, although this can mean you have less losing trades, you actually make less profit overall, the winning trades you do miss out on will reduce the profitability of your system over time.

This means you are faced with a choice which is more important to you consistency. profitability now becomes a simple matter of testing. Try adjusting the following combinations to see what suits you. The risk reward ratio by tightening and widening stops the stop loss method. Always think about the dealing ranges. Keep in mind where the market is likely to move to next, and avoid putting your stuff in places that are easy to hurt.

Remember, your loss is the again the coursework for this lesson add your stop loss method into the trading plan. I'll see you in the next lesson.