Scrolling through my mailbox everyday is one of the interesting thing i love to do since i do receive over 100’s of mails from traders all over the world asking me trading related questions. But one day i came through this interesting question that made me pause for a second and realize that aw! he was closely following up my trades.
So today i am going to address this question on public for the benefit of all.
WHAT IS A TIGHT STOP LOSS?
According to me I would define anything below 15 pips in pairs like AUD/USD, NZD/USD and other few major pairs and 20 pips in pairs like GBP/JPY and other few crosses.
Usually my goal is to obtain the most reward i can extract from the market and using tight stop loss like the ones i have mentioned above will make me achieve my goal and most of the time I do. 90% of my trades are swing trades the rest are scalps and intraday trades which do not give me the rewards am looking for so i mainly prioritize swing opportunities.
Placing tight stop loss like what i do is very scary at the beginning but when you have an edge and within time, most of your trades win then the confidence starts to rise and fear drops down.
I will tell you this, RISK REWARD is every thing once you understand this concept your trades will make more sense in terms of rewards and profits obtained. On swing trades that i take on a weekly or monthly basis i do aim for 250-350 pips now you can estimate the risk reward ratio is about 1:10 to 1:17 and sometimes even more. You can ask yourself how am i able to grab t such rewards? Its because of the stop loss i use in my positions and how far i do break even. I am blessed with the grudge of holding and being patient since the trading style i use forecasts moves of the market in a disciplined manner and the job remains to me as a trader to be discipline also.
A quick reminder, most traders think stop loss is an enemy but trust me once you start thinking that way you are setting yourself for failure. Just take it as a lesson. A stop loss is a point where the market proves you are wrong and you have to take action in finding out what went wrong unless otherwise the more you bury down your mistakes without learning a lesson, then its a loser mindset and you are likely to repeat the same mistake over and over.
I hope you have learned something positive if you have any question kindly shoot them via email and we will be happy to assist you.