Topic: Trading Lesson: Stop loss Strategies - page 4. (Read 749 times)

Hello guys! I just want to give you an idea and concepts about how to set stop loss or cut loss. I created this thread because I observed that most of the traders here in the forum are just buying certain cryptocurrency without set of rules and also without risk management. Let’s define first what is cut loss or stop loss, cut loss is simply a strategy or concept that you can use in order to protect your capital. I’m sure that there are some of you that have these thoughts in your head like “why do I even bother to learn it?”. Remember this!!! Without a cut loss strategy in every trade, for sure that your portfolio will be wipeout immediately. This is the example if you will not put stop loss or if you will not consider any risk management.

This chart is the daily chart of Litecoin. It created double top pattern last February and imagined that you buy in that price without a cut loss strategy. When it breakdown, it created lower lows and lower highs and it is simply sign of downtrend. This is the reason why stop loss should be part of our rules whenever we enter in a specific trade.




These are the 3 Stop loss strategies


1.   Technical based. This stop loss strategy is a concept where you rely on price action, price structure, oscillator or indicators when setting a stop loss. The most common stop loss is placing below the support level Let me give you an example.

Exhibit A
This chart is hourly chart (1h) of BTC/USD. As you can see that the price is ranging between the support level at $9350 and $9476. If you want to enter through long position in that trade, the ideal stop there is at below support level which is at $9350. Remember that it requires discipline because a real trader have a set of rules that he/she should follow. Whenever the price reached that level, make sure that you will sell your positions in order for you to not suffer major losses.



Exhibit B
This chart is hourly chart (1h) of BTC/USD. Unlike the other one, this cut loss strategy is relying on the indicator that I use which is 100 MA. Whenever the price reached this area, I immediately sell all of my positions in order to protect my capital.





2.   Time based. This stop loss strategy is a concept where you rely on time or date. For example, you have a time base stop loss strategy and you set it within 5 days, when the price never reaches your target profit within 5 days then you will sell your position. This kind of strategy is for experiential trader.


Exhibit A

This chart is the daily chart of BTC/USD. For example, you bought BTC in its current level which is at $9393 and your target profit is at its current resistance level at $10470 and you have a time base stop within 5 days. You will only close your position if the price reached it within 5 days or if the price doesn’t reach the target profit in the given time period.



3.   Percentage based. This stop loss strategy is a concept where you rely on percentage of a certain cryptocurrency. According to some experts in trading, the ideal percentage stop is at -8%. It only means that if the cryptocurrency that you buy reached -8%, you should immediately sell it.

Exhibit A.

This chart is the daily chart of ETH/USD. For example, you bought ETH at its current level which is at $244 per each, the ideal stop loss in percentage is when the price reached the -8% which is at $227 per each.




Thank you so much for everyone, I hope you learn concepts and ideas from this. Please use it whenever you trade in order for you to protect your capital and also to have consistent earning in the market.