The use of Stop Loss is definitely mandatory when one is trading an extremely volatile market such as the forex. It can be in the form of "Pre-Set or Mentally-Set" one though. What matters most is to know when you would like to exit the trade when you wrong.
Although using a stop loss is suppose to "Protect" any trader from getting caught up in a major deficit and slowly eating into his/her trading capital, however, most traders are getting their stop loss hit again and again until a point where they received a margin call too.
This kind of experience is indeed not pleasant especially when one has the idea that using a stop-loss is suppose to be protecting their trade instead of the other way round.
I for once also keep getting my stop loss hit and hit until those small pips get accumulated into really big ones and eat away a significant portion of my trading capital. That was during my so called "beginner" days while trying to master this forex trading thingy.
If you don't know this yet, there are just too many struggling traders who are getting very frustrated with using stop loss - Due to the fact that they are always losing when they use it!
Are you also facing the same problem too?
What can be done with this situation then?
I have a solution for you here to overcome that frustration with stop-loss placement and it is by discovering these strategies that have brought me the trading success I desired.
Here's how:
Most traders simply do not know what is the appropriate stop-loss to use and so they rather choose a "fix number" to achieve that.
That is really a wrong move as a 30 pips stop loss might be good for day 1, but due to the different volatility and market conditions in day 2, that same 30 pips might not survive it and hence they only got hit and to see the trade go the direction they wanted previously. It is very frustrating to see this situation definitely.
What is a "good" location to place the stop-loss strategically then?
1 ) Place It Slightly Above / Below A "Price Pull-back" ( maybe 5 pips allowance )
When a pullback happens, the price is very unlikely to breach that level again and this is known as the "market characteristic". Should the price gets breached and your stop loss being hit, it would be wise for you to exit too because it might be a major reversal in place and could go against you for hundred of pips ( even thousands )
2) Always Good To Place It After Spotting A "Pinbar" Formation.
When a "Pinbar" has formed in the market, it literally shows a lot about who is dominating the market now.
Example: Let's say for a strong down-trend, and you spot an Inverted Pinbar just after the pullback near the previous support, then you would know it is a "good" location to place the stop loss just above that. This kind of "Market Sign" basically signals that the SELLERS are very strong, hence forming that "Inverted Pinbar".
If you have been bothered by the problem of Stop-Loss "getting hit and hit again" although you are right about the direction in the market, then most likely you do not know about these 2 proven stop loss placement strategies yet.
Do try it and I am sure your future trades would improve significantly and you do not need to bother about wild guessing what is the right stop loss to use anymore!
Aaron Tan is a full time forex trader working from home. Ever since he started trading using Forex Price Action, he became very successful and even managed to quit his day job to trade full time and making a nice income every month.
In his blog about Forex Trading Strategies, he will be sharing with you how he achieve that in the simplest way possible.
Visit his forex blog here: http://www.forextradingempire.com
Article Source: [http://EzineArticles.com/?Forex-Trading-Secrets---How-to-Strategically-Place-the-Stop-Loss-Before-it-Ruins-Your-Account!&id=4004839] Forex Trading Secrets - How to "Strategically Place the Stop Loss" Before it Ruins Your Account!
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