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How do you set your stops?
- Always 1% of the account (no matter how far the stop)?
- 1% with a 20 pip stop (same no matter what)?
- 1 lot per pip (same no matter what)?
- other?
Obviously, the numbers and that will be different for each person and the size of their account but hopefully, you get the idea of what I'm asking?
Al always says never lose more on any one given trade. But unless I've missed something he doesn't mention how he calculates his stops.
I trade a 5-minute chart, and sometimes I find that by the time I have calculated the % to trade the market has moved a fair distance away from where I wanted to enter. However, when I used to trade a set 20 pip % stop, that used to work great, the only problem with that was it was always 20 pips away, in most cases It would be moved to a suitable position usually averaging around 10 pips. So for a lot of trades, I would actually only be risking 0.5% of my account but when it was the full 20 pips it was 1% of my account. Meaning that I was breaking Als rule of never risking more on any given trade.
Hope this all makes sense? I'm dyslexic so no the best at writing things out. Thanks in advance to anyone who can help me out.
But unless I've missed something he doesn't mention how he calculates his stops.
There are many videos (videos #33) explaining stop-loss placement. Check them out!
@ludopuig Cheers. Yeah, I've seen them. But he doesn't really go into how he calculates the risk, only where to place them (I'm slowly working my way back through all the videos but I'll skip ahead to double-check I haven't missed anything).
He sometimes mentions "bigger risk with wider stops". That's what is confusing me. If you are never risking more on any one trade, why would there be a bigger risk with wider stops?
I'm trying to do 0.5% on every trade, but sometimes the market is moving so fast by the time I have calculated it's moved a good few pips from where I had planned to enter. Which in turn makes my risk go over or sometimes less than what I had calculated.
He sometimes mentions "bigger risk with wider stops". That's what is confusing me. If you are never risking more on any one trade, why would there be a bigger risk with wider stops
In this case he is talking about points, not dollars, so a wider stop has more points of risk, tho if you cut in half your position size then you have the same dollars at risk.
I'm trying to do 0.5% on every trade, but sometimes the market is moving so fast by the time I have calculated it's moved a good few pips from where I had planned to enter. Which in turn makes my risk go over or sometimes less than what I had calculated.
You need to automate all this stuff and concentrate in taking the trades reading properly the chart. How? starting with defaults. The less moving parts, the better. So place your correct PA stop-loss, use 2 or 3 default profit targets (that fit your needed stop-loss to comply with the trader's equation), and find your I-don't-care position size.
For instance, In the emini you have to risk 5 to 15 points (lately) in swing trades. You know where your stop has to be before taking the trade (so you know if it is going to be 5 or 15), so you just place your trade with an OCO order with 15 points initial risk and 30 point profit target (2 x Max risk) and once in the trade you can adjust.
So you will be risking, in this example, a maximum of 15 points per trade, so to make it around 0.5% choose your position size by selecting between different instruments and number of contracts: the emini (50 USD per point and contract), micro-emini (5 USD) or even CFD (1 USD). Don't bother if in some trades you are risking 0.45% and in others 0.60%. In this stage, your only worry should be learning to read the chart.
