Forex – Where to set Stop Loss?
One of the simplest methods for placing a stop-loss order when buying is to put it below a "swing low." A swing low occurs when the price falls and then bounces. It shows the price found support at that level. You want to trade in the direction of the trend. As you buy, the swing lows should be moving up.
Measure the trending price moves between pullbacks, and then subtract several pips from the smaller ones…that is your target on each trade. The stop loss is placed just outside the consolidation on the opposite side of the breakout.
To take a trade, the expected profit must be at least 1.5 times the risk of the trade. Determine the stop loss and target based on these methods, then see if the reward is more than 1.5x risk. If all is good, then proceed.
If prior trending moves show that it will be hard for the price to reach a target that is at least 1.5x risk then avoid the trade. Exit all position at least two minutes before significant news events. For the EUR/USD and GBP/SUD that includes important news related to the EUR, GBP, USD, and CHF. Cancel all pending orders before news and when you are away from your computer. Create a day trading routine to avoid mistakes.
Price is always moving, so you need to be able to plan trades before and as they are forming. Before a trade is taken, you also need to know what you will do once in the trade, depending on the market's behavior.