Forex trailing stop loss strategy. So you've gotten yourself in a trade, now what? What Forex stop loss strategy should you use? If you didn't know there were different stop loss strategies, that's okay too – you've come to the right place! In this lesson, we're going to cover various Forex stop loss strategies that can be used to minimize risk.

Forex trailing stop loss strategy

Trading 212: What are Trailing Stops and How to Trade with Them

Forex trailing stop loss strategy. In other words trailing stops are a way to allow profits to run and losses to be limited. In this article I describe how trailing stops work. I also test anecdotal evidence that trailing stops lower risk and result in higher profits. This is done by running back tests on two vanilla strategies both with and without trailing.

Forex trailing stop loss strategy


There are few indicators for MT4 which draw trailing stop line. I prefer to use Chandelier Stops. I believe that with good money management this is one of the best tools to follow a trend. First of all, when you catch trend you can profit from most of the move. The good thing about ATR is that you have a stop loss level in place. When there is a close on the other side of ATR, it is a signal to close. I strongly recommend time frames such as 30m or larger.

On lower time frames like 5m there is too much algo trading. I trade with ATR on 1h or 4h charts. Depends on pair or instrument. In most cases standard parameters will be fine. If I change anything then it is usually a Kv parameter. In most cases it is around 3. Remember, it depends from pair and current situation in the market.

You should experiment with few settings and check it on historical price action if they are ok. Some traders use only trailing stop loss line, others add to that one or two indicators. In my trading I join ATR with my favorite indicators, which are:. You will succeed with ATR trailing stop loss if you trade with the trend. That is why it is good to combine it with other indicators which may help with that. Trailing stop loss works best in trending markets.

That is why you should check pair if it tends to move strong or to move in range. It is not the secret that yen pairs line to move strongly.

You enter long when ATR changes from red to green and exit when it changes to negative. This is a situation you will see rather often.

After strong move, there is a possible change in trend direction. We saw a signal from ATR to go short, but it was tot early. In that situations, I wait for break below SMA blue. You can see that first it acted as support and we could draw a support line based on recent low. When the price went below that level, it was clear that SMA did not hold. It was a good place to go short.

Also, it was ok to wait for MACD to turn negative below 0. The main problem with ATR is when price moves in a range. This is a problem with any trading system or method. It is very important not to overtrade during range moves. If you are in doubt, check situation higher time frames.

You do not have to use GMMA. Some traders prefer to have a clear chart. My good friend uses ATR with good results. This is a very good example of joining ATR with other signals. There was a signal from ATR to go short and we took it. It was rather a strong move down.

We had two possible ways of closing it. First was with ATR. So when ATR changed from red to green it was time to close close 2 on chart. You can see that it was a little late. If you have already a profitable position and want to protect your profit, you can exit earlier.

In this case, there was a cross of DEMA averages. RSI closed above 50 line. As you can see, we saved few good pips. Notice that we did not open long position. On many times, when you are hunting for bigger trend move, it is ok to stick with ATR stop.

On the chart below you can see that you were able to catch the whole move of almost pips. That is your decision:. Later reenter trend — play it for a long move — you want to catch as big move as possible. The last scenario shows a conflict. We were hunting for a trend, but when something went wrong we were closing position. If you want to catch bigger trends, my advice is to keep things simple. DEMA is very responsive and works great when you want to react fast for a possible trend change.

SMA is slower, but it is a good indicator of support and resistance and during strong moves you want to watch these levels. So my suggestion is:. On the chart below you can see that sometimes it is ok to wait for another confirmation. We had a signal to go short from ATR, but the price was still above averages. You can see that SMA was a support here.

In this case, the best option was to wait for close below SMA. You can see that there was such a close and this was the best place to go short. Another example that this is good to watch averages.

It depends from distance between and SMA. In last example, we saw a case, when and were very near each other. It was best to wait for close below Here you can see that there is a rather large distance between and It was the best idea to go short after close below SMA, with a tighter stop.

Not always everything goes according to a plan. Take a look at this example. We had a signal to go short and we took it. After a while, there was a pullback. It is rather far away. In most cases we would wait for a close above that line to exit with a loss. In this case, we have more information from and averages. After we went short, price pulled beck above and Also, MACD turned positive. It was better to take a smaller loss here than to wait for a close above ATR line.

It is impossible to show you each possible scenario. Example when ATR is far away from entry point. We can exit based on other signal. Why it is good to use ATR trailing stop loss First of all, when you catch trend you can profit from most of the move. Best time frame I strongly recommend time frames such as 30m or larger. Parameters Depends on pair or instrument. Example of Trailing stop parameters in MT4. Over pips in profit thanks to ATR stop.

Sometimes it is good to wait for confirmation. Mxed signal in a range move. Range move marked with horizontal lines. We can enter and exit position not only based on signals from ATR. With ATR you can catch very strong moves. Short trade with ATR and averages. Example of trade when there is a space between and SMA. Trade better and make more money. Fibonacci trading strategy Forex, stocks July 2, Pivots and Fibonacci trading strategy Forex, Stocks July 2,


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