43.How to Reduce the Chances of Being Stopped Out on a Trade

http://www.informedtrades.com/
A lesson on how to incorporate multiple support or resistance levels into a trading strategy for the stock, futures, or forex market to reduce the chances of being stopped out on a trade.

In our last lesson we looked at how many successful traders incorporate support and resistance into their trading strategies. In today's lesson we are going to expand on this concept by looking at how many traders look for multiple support or resistance levels when placing trades as well as how many chart patterns incorporate this concept already, providing traders with areas in which they can place their stops.

As we learned about in our last lesson, when setting a stop many traders will find a level of support if they are buying to enter the trade or resistance when they are selling to enter the trade and place there stop outside of this level. When entering trades many successful traders will also look for trades which have few if any levels of support/resistance in the direction they are trading, but several levels of support/resistance in the direction in which they are placing their stop.

Chart example:


As we have also learned in previous lessons, one of the key reason's why traders favor or recognize certain chart patterns is because they often times signal what is next to come in the market. What is often overlooked however about almost all of the most popular chart patterns, but perhaps just as important, is their ability to point out potential places where you want to place your protective stop loss.

As you can see from the below chart the head and shoulders pattern is a perfect example of this. By entering the trade on a break of the neckline and placing the stop just above the right shoulder of the pattern traders ensure that there are at minimum two resistance levels in between their entry price and their stop level if not more.

Chart Example

For patterns such as the triangle pattern which do not already incorporate this multiple support/resistance levels between your entry and your stop concept, it is often wise to find entry opportunities which provide these additional levels naturally in addition to the setup when looking at the chart pattern in isolation:

That's our lesson for today. In tomorrow's lesson we are going to look at another way traders use to set their stops: Indicator based stops so we hope to see you in that lesson.

As always if you have any questions or comments please leave them in the comments section below so we can all learn to trade together, and have a great day!

Category:

Howto & Style

Tags:

• howto
• trade
• Support
• and
• Resistance
• settingstops
• daytrade
• investing
• money
• forex
• futures
• stock
• market
• informedtrades

[ROBOTMENPHIS]

well done informtrades, you are one of the most serious people on youtube with very informaive forex subject

[ZaguriDrums]

@stockdominator shut up troll

[stockdominator]

Don't float your limit orders. Use a program like Cooltrade that allows you to use stealthmode in entering/exiting positions

[golpyz]

Thank you for all your help, your tutorials are a God send.

[kuvtsisnyiamkoj]

Dude, support and resistance are everywhere. It depends which timeframe you are looking at. It seems you have a flawed because you are looking at one time frame only.

[lvngdead]

I've noticed that on the most profitable swing trades (3-5 days), the safest stop is the low of your entry day.

If I usually get stopped out, I'm just like "fuck it" and move on to the next one.

[paulsworkshop]

The best way to avoid being stopped out is to go naked. Have some freaking confidence in your trade for cripes sake!!

[napper2009]

Thanks for your dedication in creating these videos.

Great common sense stop levels, unfortunately sense is not that common all too often for some people!

We trade extremely volatile indices like S+PMIB and IBOVISTA and GOOGLE, for this we have to determine trailing stops if we hope to ride the psychotic wolf for more than a few days..

There can never be enough resistance for our stop orders..

Keep up the good work!

Best regards.