RULE NO. 3: Set you stop loss at 200 pips or no stop loss at all (manually close your trade if your stop loss is approaching 200 pips
‘Stop Loss’: Every new trader is told to use Stop Loss (SL) and Take Profit to manage his risk and increase profitability. The typical advise is ratio of 2:1 (TP 20:SL10; TP40:SL20; TP80;SL 40; etc). Since every forex trade starts from the position of a loss (i.e. traders’ spreads), the spreads range from 3-9 or even more, most traders setting their stop loss at 10, 20 or even 30 are easy targets, thus loosing money gradual until their account are is wipe out.
The Holy Grail rules work together i.e. once there is a clear trend (Rule No. 1), you use the recommended lot size for your account size (Rule No. 2), Rule No. 3 is to insulate your trade against any unusual, unexpected, manipulative, out of this worlds temporary development. I can assure you that your stop loss will get hit less than 10 out of a 200 trades. Most of the time I closed my trades manually when I have realised my target profit for the day, week or month.
For illustrative purpose, let us look at the chart below using the same example of our hypothetical 3 traders, where they bought at Buy1, Buy2 or Buy3. With their 20-30 SL they got stopped out of the trade easily, while Trader3 SL was still intact and thus able to ride out the trade to profit.
‘Stop Loss’: Every new trader is told to use Stop Loss (SL) and Take Profit to manage his risk and increase profitability. The typical advise is ratio of 2:1 (TP 20:SL10; TP40:SL20; TP80;SL 40; etc). Since every forex trade starts from the position of a loss (i.e. traders’ spreads), the spreads range from 3-9 or even more, most traders setting their stop loss at 10, 20 or even 30 are easy targets, thus loosing money gradual until their account are is wipe out.
The Holy Grail rules work together i.e. once there is a clear trend (Rule No. 1), you use the recommended lot size for your account size (Rule No. 2), Rule No. 3 is to insulate your trade against any unusual, unexpected, manipulative, out of this worlds temporary development. I can assure you that your stop loss will get hit less than 10 out of a 200 trades. Most of the time I closed my trades manually when I have realised my target profit for the day, week or month.
For illustrative purpose, let us look at the chart below using the same example of our hypothetical 3 traders, where they bought at Buy1, Buy2 or Buy3. With their 20-30 SL they got stopped out of the trade easily, while Trader3 SL was still intact and thus able to ride out the trade to profit.
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