Hi OptimusI have found the main factors that determine where you...

Hi Optimus

I have found the main factors that determine where you set your stops and your limits (for the wins) are:

1. the volatility of the instrument you're trading
2. where the support and resistance levels are in relation to your chosen entry level - I normally set my stops just under a
3. your trading timeframe

If you're not trading close to a support level, for example when scalping, and you want to set a stop at a certain distance from your entry level then in relation to FX trading I'm a complete newbie so I couldnt advise how tight or loose to set stops on FX trades - hopefully others here will offer some suggestions. I gather FX can be rather volatile so I suspect I will find they will be looser rather than tighter. For this kind of trading, once you trade a particular instrument for a while (whether stock, index, FX or commodity) you will find what works for you by experience - set stops too tight & you'll get stopped out too often and get rather annoyed, but set stops too loose and you will lose more than you prefer to risk - its a balance.

As far as setting limits for your exits - again that depends on where you believe it will get to, and I always do a risk/return ratio calculation to make sure my target vs stop distances are at least 3:1, otherwise I wont trade. If I'm staying tuned and it gets to my target I'm always happy to let it run if its on a run, but cut and run if it falls back to the targeted limit level.

Hope this helps. Cheers, Sharks.