Here's a problem faced by many (including myself) new traders who are working with limited funds
The first problem is that you cannot afford large losses of fifty or one hundred pips because after ten or so losers your account has been decimated.
But that sets up the flip side and the second problem, which is getting stopped out of trades because the Stop Losses are too tight. Talk about a Catch-22!
It's heartbreaking getting stopped out of a trade and then watching it reverse and turn into a winner after you've been clobbered...and here's the danger for new traders
After getting frustrated this way a few times you set wider stops and lose larger sums of money.
So, what to do?
I have had good success, suffered smaller losses and stayed in more winners by employing Bollinger, 8sma and 21 sma.
Choose any pair, open a one hour chart and study how the price behaves. If the price is not going to pass through both averages and head to the opposite Bollinger Band (or close to it), it will often bounce off either the 8 or the 21. Sometimes it will pass through one of the averages and then bounce off the other.
Try setting your stops on the opposite moving average of your trade +10 pips. (Keep an eye on support and resistance levels too!) The thing is you have to monitor this and adjust the stop as the trade progresses, but the bottom line is that you can set wider stops with confidence. Other times, you can set tighter stops and not risk as much of your account balance.
--- by pzalvo / FxStrtgRvl ------
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