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How to speculate in forex by setting a stop loss 2 - Money Stop

Lets start with the simplest type of stop cashback forex profit calculator: the money stop Th cashbackforexpipcalculator is also known as a proportional stop loss because it uses a defined ratio of the trading cashbackforexprofitcalculator, assuming 2%, which is the percentage traders are willing to use to take risks Different traders have different risk ratios The more aggressive traders will take risks of up to 10% of their account, while the less aggressive, usually only take 10% of their account per trade Once the risk ratio is determined, traders use the size of their position to calculate how far away from the entry point their stop loss is, right? Its a good trade for traders to set a stop loss according to their trading plan, right? WRONG!!! You should set stops based on market conditions and system rules, not the amount of stop loss you want we bet youre thinking right now, ha! No reason for that I remember you saying we need to control risk we admit that sounds a little disconcerting, lets take an example remember cashback forex San from the position sizing course? Zhang San opened a mini account with $500 and the minimum size he could trade was 10,000 units Zhang San decided to trade GBP/USD because the pair was blocked at the 1.5620 resistance level According to his risk management rules, for each trade, Zhang San was only willing to take less than 2% of the total account to risk 10,000 units of GBP/USD, each point is worth $1 and 2% of the account is $10, so, Zhang San was able to The maximum acceptable stop loss is 10 points, which is what he did in this trade, set the stop loss at 1.5630 but GBP/USD moves more than 100 points per day! He easily left the market with a stop loss even though the GBP/USD was moving very little because his account was limited to the position limit and he set the stop loss based only on the maximum loss he wanted and not on the market conditions of the GBP/USD Lets see what happened next! Zhang San happened to leave the market with a stop loss at the top because his stop was set too tight! In addition to losing the trade, he also missed the opportunity to catch a move of over 100 pips. As you can see from this example, the danger of using a money stop is that it forces the trader to set the stop loss at an arbitrary price level either too close to the entry point, as Zhang San did in this example, or at a position that does not take technical analysis into account in the slightest, even though you know that you can set the stop loss at a price that is going to turn and start moving in your favor (hasnt anyone seen this before?) ), but since youve already left the market with a stop loss, you cant take those points into your pocket! What a bummer! The solution offered to Zhang San is by allowing him to trade 1,000 units of GBP/USD using a micro lot or custom size broker with a value of $0.10 per pip Zhang San wants to stay within the risk appropriate zone, he can set a stop loss of 100 pips on GBP/USD and within that range his losses are less than 2% of his account Now he can set his stop loss according to market conditions, trading system, support resistance, etc. His stop loss size is now