Stop Loss Mistakes In Forex Trading - Don't Place Unrealistic Stops

PRLog (Press Release) - Jan 26, 2010 -
Rahul: One mistake that is made by forex traders is not to have a stop loss on trades. Such trades are wide open and a big risk for the trading account. But the even biggest mistake is to have stop loss which are completely unrealistic! I mean, imagine you open a trade anticipating the currency pair to go up. You place a stop loss which is very close to the entry price. How would it feel when you see currency pair just hit your stop loss and then go in the direction you predicted? Its frustrating..isn't it?

Moreover it just starts breaking the confidence! You start doubting the system and
your analysis is deeply impacted. If you are using stop loss (which I highly recommend), then the values have to be realistic! The value of stop loss should be driven by –

1. The time frame you are trading
2. Ofcourse, Your risk taking appetite.

For example, if you are trading on 1 hr chart, any stop loss that is less than 45 pips
is highly risky. Basically a tight stop loss doesn't allow currency pair to move around.
On the other hand if it is more than 65 pips, then you need to make sure that your average
profit is more than 100 pips to keep trading profitable. So whenever you are trading make sure that you have stop loss in place and the stop loss should be effective and realistic at the same time!

http://www.ninjatraderblog.com/trading/2009/10/swing-trad...