Stop Loss - Using Stop Losses in Swing Trading

A stop loss is absolutely critical in swing trading and any kind of trading.  Sadly this is often ignored and many traders place trades without stop losses.  They are unaware of just how dangerous this kind of trading can be.  Where is the best place to place a stop loss order for a swing trader?  What is the best size of a stop loss?  While the exact answers will vary depending on your specific system rules, there are guidelines to help traders answer these questions.

As swing traders are trading the swings in the market, one of the best places to put your stop loss is just below your entry point.  More often than not, this is a swing high or swing low in the market.  The logic behind this is that if price drops down below your point of entry, then that swing is invalid and cancels out the reason for you being in the trade.  Other possible reasons for stop losses may be based on specific indicators.

Just how big should a stop loss be?  The most common method of setting a stop loss is based on the size what you expect to gain.  You should never you a stop loss of less than 2:1.  Meaning, that what you stand to profit from the trade should be twice as large as what you are prepared to lose, or the size of your stop loss.  Going any smaller than a 2:1 risk reward ratio will ultimately blow your account in the long run.

No matter if you trade forex, stocks or other markets, always use a stop loss.  Stop losses are the best way to protect your precious trading capital.

Discover Swing Trading secrets, learn more about Stop Loss and apply it to your Forex Trading today.

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