HOW TO USE STOP LOSS AND TAKE PROFIT (SL & TP)

HOW TO USE STOP LOSS AND TAKE PROFIT (SL & TP)

Firstly our summary of today;

Right now the clarification for the posts this morning, I was literally in the process of editing my TP but it shot up and hit my TP. Nevertheless profit is profit and done for the morning. 42pips on the GBPAUD and 35.4 pips on GBPUSD was literally just about to press enter on GBPUSD. Anyway green arrow is the buy, red is the exit and buy back or sell off. On GBPAUD especially a very very clean chart as there was a continuation this morning on hand over then a reaction on Tokyo high and 2nd handover then a break on the news hence why I want to move the TP as the AOA’s this mornings where working perfectly. Another factor is we have had 2 shit days of trading – meaning the markets where all over the place and this doesn’t last forever nothing does so sooner or later the market was going to give way.

 

 

HOW TO USE STOP LOSS AND TAKE PROFIT (SL & TP)

So going to try help you guys today on the point of how to use stop loss and take profit;

  • When to use them.
  • How to determine them
  • The truth about them (slippage etc)
  • Is it important?

First and foremost SL AND TP are the single most important things in trading besides risk management (click here to read) why?

Well how can you enter a trade without knowing how much you are going to make? how much you are willing to risk? If your don’t these information then you are definitely gambling I would even dare to say you are jumping into a trade blindly.  Like how I always teach, its so important to have your thesis before you trade so you have a clear idea on what you are doing.

So the answer is, you have to have a SL and TP within EVERY TRADE so be it mentally or physically (input into your trade broker).

How to determine them?

Well charting and screen time is yet another thing I always hound to my team and students, you have to be on top of your charting to know the significant levels for your AOA’s (area of attentions), not every level you define will be 100% accurate and some that you do draw maybe working perfectly but the whole point of them is understanding that these are AOA’s that you need to be aware of and maybe you should either TP before it move your SL, or even rethink your entry point. These are such a huge factor when it comes to execution and the difference between a beginner trade and a professional.

 

The truth;

My broker post will be up in the future to teach you more, but unfortunately there are some brokers out there that are mean to retail trades in regards to slippage. Slippage can happen in your favour and against you – slippage is when the price may or may not actually hit your physical due to market volatility and your TP / SL was given at the next best available price. So you could be slipped on your SL by 3 pips when it didn’t hit and then it shoots up the other direction to hit your TP – vice versa shot past your TP and gave you a better price and you ended up banking another 10 pips on top.

So the point goes back to the basics, you really need to be able to define your AOA’s.

A lot of professionals I know are at the screen most of the time and set mental SL and TP and execute appropriately, this gives them the leeway and avoids slippages. However it increases the risks and I don’t recommend it if you are just starting out. Like I say if the opportunity has gone, there will still be plenty more to come.

Is it important?

Yes

Thats all there is to it, haha if you have read this far then you should’ve been able to answer that question yourself.

 

Leave a Reply

Your email address will not be published. Required fields are marked *