Stop loss technique.

There are many options for setting stop loss orders when trading forex, each method has its own advantages and disadvantages, so it is best to choose the one that best suits your strategy and the amount of your deposit.

Forex stops are designed to protect the deposit of a large drawdown and the triggering of a margin call or stop out , the latter almost completely deprives the trader of his funds.

Let's move on to a review of the main techniques used to install safety stops.

1. By levels - these levels can be support and resistance lines, significant highs and lows, or simply significant levels.

This technique is based on the assertion that if the price breaks through a significant level in the opposite direction from the existing trend, then with a high probability we should expect the continuation of this movement.

Therefore, we set stops:

• When buying, below the support line or below a significant minimum.
• When selling - above a resistance level or a significant maximum.

Don’t forget about the likelihood of false breakouts, in which case the price can only break the stop and again go towards the trend, so the distance for the stop loss should be 15-20 points further than the level itself.

Unfortunately, this option is not always suitable for trading with high leverage; the problem can be solved by switching to a smaller time frame.

2. Candlestick option - used if you entered on a long candle that broke through an important level, in this case you can set a stop loss immediately after the minimum (maximum) of this candle.

Sometimes stops are placed through a candle, the main thing is that there is sufficient distance between it and the entry point. 3. Based on movement - in this case, the reference point will be the average volatility of the market; this indicator allows you to navigate where the current price is.

For example, on average a pair moves 80 points per day, today it has passed 20, which means that when opening a position following a trend, you can set a stop loss at 30 points from the current price, assuming that it will only work if the price reverses.

Volatility Calculation script will help you perform the calculation automatically .

With all this, stops on Forex must be calculated to ensure a minimum number of false positives, while to minimize losses you can also use trailing stops or manually moving stop loss to the break-even zone.