BTC/USD

$67,603.20 1.05%

ETH/USD

$3,762.03 2.04%

USD/EUR

$0.93 0.08%

VIX

$14.28 10.53%

NASDAQ Composite

$16,920.60 0.58%

DXY

$105.13 0.03%

BTC/USD

$67,603.20 1.05%

ETH/USD

$3,762.03 2.04%

USD/EUR

$0.93 0.08%

VIX

$14.28 10.53%

NASDAQ Composite

$16,920.60 0.58%

DXY

$105.13 0.03%

BTC/USD

$67,603.20 1.05%

ETH/USD

$3,762.03 2.04%

USD/EUR

$0.93 0.08%

VIX

$14.28 10.53%

NASDAQ Composite

$16,920.60 0.58%

DXY

$105.13 0.03%

BTC/USD

$67,603.20 1.05%

ETH/USD

$3,762.03 2.04%

USD/EUR

$0.93 0.08%

VIX

$14.28 10.53%

NASDAQ Composite

$16,920.60 0.58%

DXY

$105.13 0.03%

Where Should You Place Your Stop Loss When Trading?

Where Should You Place Your Stop Loss When Trading?

If you don’t know the best place to put a stop loss, don’t worry. You are not alone.

Most traders tend to cut losses when they’re down a certain dollar amount or a certain percentage, but that’s not always the best case — especially with a small account.

When trading with a small cash account…

you can only afford 3–5 trades a day. This makes this even more important. By placing your stop loss just below the trend line, you have a better chance of staying in the trade, rather than having to close it for a loss and having the stock rally shortly after. This will also help safeguard your emotions.

Another reason we don’t follow a strict percent-based stop loss is that you won’t always get the perfect entry. Rather than worrying too much about the exact entry, we can place our stop at the break of our trend or support line.

Take a look at this example:

You noticed AAPL was in an uptrend, so you drew in your trend line and decided to enter a trade. You entered a little early at the first circle.

If you followed a set percentage, you likely would have been stopped out by the first red arrow, resulting in a loss. AAPL then bounced off your trend line and now you are upset because you lost money on what is now a winning trade. You got the trend right but still incurred a loss because you exited too early.

If you used the break of your trend line, you would have been able to hold onto this position until the second red arrow resulting in a gain.

Other things to consider when placing a stop loss:

After a large push, it is common to see a small pullback. After the stock pulls back, the new low of that area is a great place to raise your stop loss. If the stock flushes and falls below that level, take your profit and move on to the next trade.

You should also be aware of your maximum loss, or the maximum amount of money you are willing to lose in a trade. If you are hitting your max loss before the break of your trend or support line, then your position size is too big and you need to size down.

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