23
2007
Forex Trading - Where to Place Your Stops
Whether or not forex brokers actively hunt for stops is open for debate. However, I believe that they do succumb to the temptation sometimes. And the killer is most forex traders make it easy for them.
If you ve got your stop ten to thirty pips way from the price when you enter your order, you re a sitting duck. You re asking for the broker to take your money.
Just last week a trader wrote to me and complained (rather vehemently) that all brokers where crooks. He s got a point. However, most traders just make it way too easy. Way too easy.
So where should you place your stops? Where you don t expect the market to go. That such a simple (and extremely effective) idea, that I want to repeat it just to let it settle in.
Put your stop where you think the market won t go.
It s a beautiful concept, is it not? Of course, then the difficulty becomes determining where the market won t (or more correctly) shouldn t go.
This isn t as hard to figure out as you might expect. For example, finding a resistance area (or support area) in the market and place your stop behind it. Guarantee you that if a major resistance point is taken out, your trade wasn t going to work any way.
Another one of my favorite techniques is to place my stop outside of Bollinger bands. After all, if 95% of the price is inside of the bands, only 5% of the time would my stop be hit (that is an overly simplistic overview, but the basic idea still holds true).
Do you want to learn more about how I trade? I have just completed my brand new guide, “Forex Trading - What Finally Worked For Me”.
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