1. Stop Loss placement.
2. Calculation of Stoploss.
3. Calculating Position Size.
4. Probably never get bankrupt trading.
We need a stop Loss to determine where should we cut or exit the trade.
90% Traders use Stoploss but many of them don't know how to use it properly,
Everything you need to about deciding, placing and calculating a stop loss and position sizing..
A Thread🧵
1. Stop Loss placement.
2. Calculation of Stoploss.
3. Calculating Position Size.
4. Probably never get bankrupt trading.
We need a stop Loss to determine where should we cut or exit the trade.
showing an opposite move than we had anticipated and hence it should no longer make sense to ride in the opposite direction.
Stop Loss is to be placed at that area where the market structure has turned in the opposite direction
If the above scenario happens, an SL at the level which changes the mkt strctr is logical.
1. To find the area where the MS might change and
hence it'll become illogical to keep a trade going whilst
market structure is pointing a move in the opposite direction.
2. To calculate the Position Size of the trade.
To quickly illustrate- lets see an example
We want to risk only 1% of our Capital i.e. 1K
The distance between the current price and the price where the MS will change i.e. The place where we want to place our SL is 4%.
Once we enter a position with 25000 Rupees and place our SL at 4% of the current price, we will only lose 1000 rupees.
In margin trading also, the same method works
This is all you need to master stop loss.
BASICS OF SL
There are only 2 tools in trading that will prevent you from blowingup your account
2. Stop Loss
If you don't follow the rules of the above, YOU WILL FAIL. Period. In
In this Thread, we will master Stop-Loss, in detail.
A common fallacy amongst traders is that Stop Loss has to be a certain fixed percent of loss.
Eg. Fixing Stop Loss at 5%.
This is a very bad idea.
Stop loss should be based on TA alone.
Every setup is different and a fixed SL won't work.
Entry is made ONLY as per TA on a valid reason for a directional
move. Once the reason for the entry has been lost, the trade must be
exited.
The event at which the reason for entry ceases to exist is the
invalidation level.
Entry example.
Stop Loss is a tool to be ABSOLUTELY used as soon as the setup reaches an invalidation point.
Always establish the invalidation point before entering a trade.
As soon as the invalidation event turns true, EXIT without a second thought.
If the entry was made because of a support being confirmed, but if the support gets broken, the reason for the entry no longer exists and hence, a stop loss must be entered
I will only be using simple Support/Resistance reasons for entry to keep it simple.
1. Placing SL during consolidation Break-out.
Note- Place it a little below the invalidation level to prevent stop hunts
The stop Loss is placed at the bottom of the consolidation.
Rest of the events are self-explanatory.
-Resistance Support Zone recognition
-Break-out
-Re-test Confirmation
-Resistance Zone Flip
-Break-out confirmation
Some traders swear by a strict stop loss order being placed as soon as an entry is placed including me.
1. Stop Loss is based on Market Structure of the setup and the % of SL is
different for every trade.
2. Stop Loss is placed where the MS will probably change. If MS
changes, we'll be rising the opposite trade.
SL = Invalidation Level.
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