Read on Twitter
MASTER-CLASS on Stop Loss
99% of the traders fail because they don't understand Stop Loss.
Stop Loss is the most important topic to prevent liquidation and avoiding bankruptcy.
This is all you need to master stop loss.
A Thread.
99% of the traders fail because they don't understand Stop Loss.
Stop Loss is the most important topic to prevent liquidation and avoiding bankruptcy.
This is all you need to master stop loss.
A Thread.
There are only 2 tools in trading which will prevent you from blowing up your account.
1. Risk Management
2. Stop Loss
If you don't follow the rules of the above, YOU WILL FAIL. Period.
In this thread, we will master Stop-Loss, in detail.
1. Risk Management
2. Stop Loss
If you don't follow the rules of the above, YOU WILL FAIL. Period.
In this thread, we will master Stop-Loss, in detail.
Different Charts= Different SL
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.
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.
Stop loss = Invalidation level.
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.
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.
Invalidation Point reached? GET OUT!
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.
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.
Once the reason for the entry has been lost, exit the trade as the premise for the entry no longer exists.
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
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
Let us understand placing the stop Loss with the help of few examples.
I will only be using simple Support/Resistance reasons for entry to keep it simple.
1. Placing SL during consolidation Break-out.
Note- I Place it a little below the invalidation level to prevent stop hunts.
I will only be using simple Support/Resistance reasons for entry to keep it simple.
1. Placing SL during consolidation Break-out.
Note- I Place it a little below the invalidation level to prevent stop hunts.
2. Placing stop loss with
-Supply Demand Zone recognition
-Break-out
-Re-test Confirmation
-Supply Zone Flip
-Break-out confirmation
-Supply Demand Zone recognition
-Break-out
-Re-test Confirmation
-Supply Zone Flip
-Break-out confirmation
3. Let's try to understand a bit advanced stop loss using
-OBV
-Volume.
Price goes up, volume doesn't.
Price goes down, volume goes us.
THIS IS BEARISH.
Price goes up, OBV doesn't.
Support is broken.
Bullish invalidation = SL Entered.
Note- This is how 2017 top was confirmed
-OBV
-Volume.
Price goes up, volume doesn't.
Price goes down, volume goes us.
THIS IS BEARISH.
Price goes up, OBV doesn't.
Support is broken.
Bullish invalidation = SL Entered.
Note- This is how 2017 top was confirmed
Stop Loss is a very controversial topic as some traders don't like to place a SL order as it could lead to stop loss hunting.
Some traders swear by a strict stop loss order being placed as soon as an entry is placed.
The solution to this dilemma is discussed below.
Some traders swear by a strict stop loss order being placed as soon as an entry is placed.
The solution to this dilemma is discussed below.
1. Place the SL BELOW the invalidation point to avoid SL hunting by wicks.
2. Exit the trade on invalidation with using SL manually AFTER the invalidation is confirmed to avoid stop loss hunting.
I personally exit manually after invalidation is confirmed to prevent SL hunting.
2. Exit the trade on invalidation with using SL manually AFTER the invalidation is confirmed to avoid stop loss hunting.
I personally exit manually after invalidation is confirmed to prevent SL hunting.
We will learn more about Stop hunting in the next thread.
Conclusion.
1. Stop loss cannot be a fixed percentage as all trade setups are different.
2. Stop Loss is nothing but an exit at an invalidation level.
Reason for entry no longer valid = Stop Loss.
Conclusion.
1. Stop loss cannot be a fixed percentage as all trade setups are different.
2. Stop Loss is nothing but an exit at an invalidation level.
Reason for entry no longer valid = Stop Loss.
3. Use ONLY TA to find stop loss. Stop Loss = Invalidation level.
4. Always have the Stop Loss determined before entering a trade.
5. You don't have to post the SL order, you can exit manually on invalidation to avoid false wicks aka Stop hunting.
4. Always have the Stop Loss determined before entering a trade.
5. You don't have to post the SL order, you can exit manually on invalidation to avoid false wicks aka Stop hunting.
P.S. Don't be in a rush to move your SL to break-even. This leads to your market participation without any benefit. We will learn about this concept Part 2 of Trading Bitcoin Master-Class.
Read the thread again, Practise it with Support/ Resistance and place SL at Invalidation.
Every setup needs it's unique SL. Read the charts, adapt to different setups. Practice, Practice, Practice.
Hope this helps. Share if you found it useful to help other traders.
Every setup needs it's unique SL. Read the charts, adapt to different setups. Practice, Practice, Practice.
Hope this helps. Share if you found it useful to help other traders.
