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How to set a stop-loss price level
Setting a stop loss for a significant price level-is a popular method for determining the optimal locations for the placement of the order. The General theory of the use of stop loss is stated here in this article. Today we will consider one of variants of operation with stop loss when price levels are used.
This approach to cutting away losses can be found among traders on different time frames. The man defines the next level and offers him a warrant.
To start with, how to determine critical price levels. This task at first glance may seem simple, but in fact, visual search is very subjective. As an example of how seeing the same chart, different people call support and resistance, I recommend to watch webinar recording (this issue rises to 15 min 30 sec. video):
Therefore, for the present examples will be used albeit controversial indicator, but is able to give an objective price reversals (to our human factors not influenced). We are talking about the standard MetaTrader4 platform the indicator ZigZag.
Indicator for stop loss
How to set a stop-loss using indicator ZigZag? Look at the illustration above, which shows normal market conditions and transaction made by the trader. In this example, we will only be interested in the placing of stop loss.
To begin, decide what price level we will see not as a single line corresponding in width to only a single price value, but as a range. The width of this range should depend on the volatility of the currency pair and timeframe. The higher TF is used to analyze the situation, the greater may be the level width.
Wystawiam stop loss
Level determined through the ZigZag, looking for the last local minimum (for buy transactions) or local maximum (for sell trades). Using the angle formed by the two lines of the indicator is the area the width of which, for example, eur/usd timeframe M5 will be about 3 points.
Several methods of placing the take-profit order.
Stop loss is set below the level (for our example with buy-in agreement). This kind of indentation should help us to avoid closing the position with a loss in the case of short "puncture" level. Agree that it would be a shame if we put stop loss directly on the support, and the market touches a warrant and will unfold in the opposite direction.
Stop Loss in this situation, it turns "protected" by the support, as seen in the picture above. However, difficulties may arise with the definition of significant level, followed by positioning the stop losses.
Placing orders on the chart the stop loss
Seen that the last local minimum, which is on the chart prior to conclusion of the transaction, not so much like a strong support, as the previous one. In the figure there are two lines through the local minimums near which lies the question marks. In such a situation it is necessary to take a stronger level, that would be for him to "hide" your stop loss.
Price level and stop loss in Forex
If You otherwise determine price levels, it will not affect the method. Most importantly, what You can clearly see where the nearest strong level and put your stop loss for it. It is much more efficient than to place the order, for example, the standard for all transactions of the distance from the opening point of the position.
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| Category: Forex | Added by: (05.11.2017)
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| Views: 397
| Rating: 0.0/0 |
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