In this video:
00:24 A good way to manage your stop losses
01:31 Stop loss base on a horizontal level
04:10 A Russian client made an incredible 4.7 to 1 risk to reward
06:26 A lot of strength in the GBP, Euro and Swiss Franc
Forex Tips and Advice of How to Manage Your Stop Loss
I want to give you some information, some tips and advice of how to manage your stop loss. Let me share more information with you right now.
Hi it’s Andrew Mitchem here the Forex Trading Coach. Today is Friday the 24th of January and on today’s video and podcast I want to explain about a good way to use your stop losses, so how to manage your stop loss when you’re in a trade. You see it’s a question I get asked quite a lot and I even had the same question arrive in my inbox this morning from someone just seeking some advice and say, “Hey Andrew can I use something like a Parabolic SAR or that’s the example he gave this morning or any other type of indicator to help manage the stop loss on a trade once the trade is open.
The problem with most indicators and the parabolic is no exception is that it tends to lag badly on the price and time. And you can’t really just use one indicator and rely on that dot on a chart to say this is where my stop needs to be or when it changes from below the price to above the price, this is where you know when I need to get out of the trade. That’s just not a good way of using or managing a trade.
A stop loss based on a horizonal level
What I suggest the people they do and my clients know this already is that I suggest you use a stop loss based on a horizontal level. Now that could be something like any type of support from resistance level so rather than just using an arbitrary figure like an indicator or like say 20 pips or 50 pips or whatever it might be that has no relevance to the timeframe of the chart or has no relevance to the currency pairs or the time of day and what I suggest you do is look for horizontal levels.
For instance if you were taking a buy position and your trade was in good profit. What you can do is move your stop loss. Let’s say you have your stop loss at the low of a setup candle. The trade moves into some fairly good profit but hasn’t reach the full profit target yet. What you can do is look for let’s say like the daily pivot point. Look for the next swing low or previous swing low so you’re moving your stop loss up in gradual increments but based on technical levels of what’s been already respected by the price in the past.
You could move your stop loss up to below a round number so for instance if you are trading the EUR/USD, instead of putting your stop loss at say 1.3510 if you’re buying you were better off having your stop loss down below 1.3490; 1.3495 something like that down below a horizontal level such as a round number and I’m calling round numbers anything ends in 00 or 50. If the price tends to move up you could then move your stop loss up to just below the 50 level or it keeps going and you still haven’t reach your profit target up below the next 00.
If you’re in a shorter timeframe charts you could be looking for swing lows or previous bounce levels, things like that. That’s going to give you a lot better protective stop loss in place that allows the trade to go through and hit your hit full profit target and without coming back and taking you out to a stop too often. So that would be my advice there.
4.7:1 reward:risk trade on the 1 hour charts
I held a live webinar for my clients yesterday. We had a full room again. Just a fantastic webinar, lots and lots of live trade examples between trades that I took myself and trades that clients had open or took live during the session. We probably had close on about ten trades that we took live. Just a lot of trades. One that I want to pick out was from a client of mine over Russia and he had a trade on the EUR/JPY on the one hour chart during the session. He placed the trade, he put his stop loss on, he put his profit target on and it hit profit within the 2 hour live webinar and he made an incredible 4.7 to 1 risk to reward out of that trade.
So for example if he was risking 1% of his account on that particular trade setup he made an amazing 4.7% return on just that one trade within under 2 hours I think really it was under 1 hour because the Euro just took off beautifully while we’re on the webinar. So that was just a great trade, many examples I took trades on the one minute charts, the five minute, the fifteen, I didn’t take fifteen myself but other clients did. One hour charts, four hour charts trade I had already open and daily charts of course and I even show the examples of weekly charts.
So just go to show, it doesn’t matter what timeframe suits you, what time of the day you can trade, what part of the world you live in, when you can trade it really doesn’t matter. It’s what suits you and what you see as a good setup. That’s the important thing so when you have a good technical trading system, it will work on any timeframe chart and on any currency pair. And so that’s what makes a price analysis so different to most other systems. You see there’s a lot of systems out there and people say just use it on the one hour chart on the EUR/USD, nothing else or just use it on the EUR/CAD five minute chart and nothing else whatever it might be. That’s not what I call true technical trading. Technical trading will work on any timeframe on any market and that’s what I offer my clients which is why so many of them do so well.
As you can see from the gentleman over in Russia making up 4.7 to 1 risk to reward trade live in front of us on the webinar just brilliant trading and so pleasing to see results like that happening live. There’s no better way of learning than watching something happen in front of you live at that time. No hindsight, no cherry picking, no just taking the best trades, ignoring the others just what’s happening there live right in front of you. So it’s just a great tool there for my clients to use. If you’d like more information just contact me about that and I can send you some information.
GBP strength and CAD weakness this week
On to the charts themselves this week well we’ve seen a lot of strength in the GBP and lately on the Euro and the Swiss Franc and we’ve seen a lot of weakness on the AUD and the CAD. Now if you follow my strength and weakness analysis you’ll see that on Wednesday I was suggesting a lot of strength in the GBP and a lot of weakness in the CAD. And there were two news announcements that came out almost twelve hours after I’ve made that prediction or that analysis and one was the unemployment data from the UK, the other out of Canada was the interest rate announcement.
So it was fairly clear to see well before like 12 hours before those news announcements, what the likely direction was going to be. I don’t know what the figures going to be, what the outcome’s going to be but I know with high probability what the likely direction is going to be. And I’ll put that on the Internet on my post, on Forex Peace Army for everybody to see more than 12 hours before those announcements came through and then followed through in the same direction as my analysis. I actually suggested looking for buy trades on the GBP/USD and on the GBP/CAD that day both provided many great setups.
Last thing I want to mention is chapter 3 of my new EBook “From the Dairy Farmer to Forex Trader” has been released this week. You can get that on the Forex Army website and you can also get a copy of the video, the PDF file and the audio MP3 via my site just by signing up on the EBook tab within my site.
So that’s all for now have yourself a great weekend. It’s in the middle of summer over here in New Zealand so I’m off outside to enjoy the sun, enjoy the pool, hope you guys in Europe and the States not so cold. I realise you’re going through a very wet time, a very cold time right now. We are very fortunate to be in summer so I’m going to make the most of it.
Look forward to talking to this time next week. This is Andrew Mitchem from the Forex Trading Coach . Bye for now.