Moving Up Stop Losses

Filed under: Learn Forex Trading |

In my live trade article today, I talked a little more about taking what the market gives you and moving up stop losses as and when appropriate. This is something that I have been practicing on Forex Tester recently, and I would like to run you through an example of a trade that I made on Forex Tester while moving up my stop loss in line with the narrative of the market.

 

Figure 1.

Figure 1.

If you take a look at Figure 1, you will see the trade in question. What you can see is that price had broken through a strong level of support/resistance (marked with a horizontal red line) with a long bullish candle, and it was here that I put an order in to go long at the break of the high of this bullish candle, with an initial stop loss placed a few pips below the low of the bullish candle, and with no target set at all.

 

This order was filled, with a bullish pin bar forming, confirming this bullish action. A few more short candles with lower shadows followed this; so I did nothing at this stage, and let the market do its thing. This was then followed by a number of bullish candles, putting us into profits, before a bearish engulfing pattern formed. At this stage I moved the stop loss to just a few pips below the low of this bearish candle. However, this was not hit and another bullish candle formed, before some ‘dark cloud cover’ formed and another bearish candle. Again, I moved the stop up to a few pips below this latest bearish candle, and again, this stop was not hit and another massive bullish candle formed. Finally, another bearish candle formed, and I again moved the stop up to a few pips below this bearish candle, and this time, this stop loss was hit as another bearish candle followed this. Thus, with an initial risk of 1% of the bank, this trade gained a profit of around 2.3%.

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