There is no rule when setting stops and take profits, but generally you will want to keep the risk to reward, at least one, preferably 2 or higher
If you are not familiar with R:R, how you plan to risk vs. how much you plan to acquire,
An R1 would mean risking as you plan your giving
An R2 would mean targeting twice what the precipice
Patronized by stops and take profits.
An R1 would mean you stop and take profit is equal
An R2 would mean your profit will be your stop loss twice
Many new traders will prepare a draft, as you have instructed to have been adamant on using a certain R:R as 2: 1, you'll find an installer and will decide that they want to trade throughout the day so there is no interruption will be offering an automatic 30 taking profit of 60.
Such transactions are likely to be very efficient, since there is no real rationale behind the placement of stops and take profits.
You should get support and resistance into account when placing stops and take profits and support and resistance refer to horizontal lines across the recent highs, lows, double/triple-tops or bottoms, trendlines and Fibonacci retracements. the strongest support and resistance are where many of them overlap, you can also try spot candle patterns forming around the S + R regions or lines for additional confirmation.
Using the methods mentioned above to begin work on the distance between your posting, nearest support/s and resistance/s to begin planning your trade and work your risk: reward ratio.
For example you plan to enter the market in the pair Usd/Jpy at a price of 89 65, can make a very strong resistance to 90.00 and a very strong support at 88.60. your post is 35 points of resistance and 105 points by the support, if you take a short position, you will have a trading risk: reward ratio 3: 1 which by any standards a fine trade. You will then want to tweak it slightly when you stop say 10 points above resistance and your winnings will take 10 points above support, now greatly increases your chance to protect your stop and prices, reaching your destination, while still maintains a R2 +
I hope this has helped, I am sorry if some seem like to point out the obvious to some, but many new traders find it harder to grasp than you might think, I have in recent months, starting with teaching negotiation in some wealthy clients and as smart as they are, sometimes really struggling with some concepts
Lee J Brown
http://www.ProFXBlog.com
My name is Lee J Brown and I am a full time forex trader from London, United Kingdom. I have been trading forex just over 4 years now, and I would like to share my experience with the world
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