psrikant1978 said:
Nautilus
Now, the EUR/USD is trading at around 1.2054/6 as I write this. What is your stop-loss now according to your long term target of 0.9650 to 0.9700. How did you calculate your stop-loss.? When do you think this target be acheived.?
Do you mind giving me your email address to discuss further? You can mail me at psrikanthan at gmail dot com.
Thanks
Prashanth
Hi Prashant:
As of this writing the Eur/Usd closed at 1.1810 on Friday 4th Nov. I will explain in detail how I work out stop-losses on my trades which may or may not help you and other members of the forum.
The stop-losses I use are not arbitrary and they are trailing. I always try and work out
a significant point (according to me) on the chart and then the stop-loss is placed.
Here is a realtime example: (for confirmations and further study look at the hourly chart on Eur/Usd at
www.netdania.com - the explanation here would make more sense if it is read in context with the chart)
This is how the market dynamics worked on 4th November: If you look at the hourly chart on Eur/Usd you would find that after around 0.30 am on 4th November the Eur/Usd market was not going anywhere and was trading in a very narrow range - this small trading range continued for another 18 hours - then at 18.30 in the evening there was a strong up-thrust making a high of 1.1978. What this did was that
all the stop-losses that were placed by traders during the day above the 18 hours of congestion were washed out and the market got rid of most weak shorts. This bar then was followed by another bar (19.30) that made a still higher high of 1.1993 - clearing out further short participants- and then the market started making lows continuously during the entire hour and finally it breached the low of the previous bar at 1.1921 -
this resulted in an hourly "key reversal" preceded by a long price congestion - followed by sharp up-thrust resulting in many weak hands being taken out of the market - a very good pattern indeed for a stop-loss placement, so I moved my stop-loss down from 1.2275 to 1.1996 (three pips above the high of 1.1993).
IMPORTANT:
The above action of the market which saw long congestion followed by an up-thrust and then ending up with a massive break down in price is referred to as the PERVERSITY of the market - what this means is that the market makes participation so frustrating that most people end up losing for the day - and those who tried to participate - are shaken off before a LARGE move commences - perversity just prevents people from participating in strong profitable moves. The areas of perverse actions of the markets are significant from the point of placing stop-losses.
I can also suggest that a five day high (if you are short) or a five day low (if you are long) trailing stop works reasonably well. There are many other methods used by different people on this forum - again check out the threads - they will teach you a lot. But most importantly your stop-loss levels must be placed at significant levels.
As regards when the market may or will reach my objectives - the simple answer is I do not know -
the market takes its own course - and if it decides that it will not reach my objective then I have an alternative scenario planned - in the meantime if the trade is going in my favour I just manage the trade.
Hope this helps.
Regards
Nautilus