Initial Stop Loss Values

Alrighty, Entry Rules say "yes or no", Entry Values set the price to enter, now we need an Initial Stop Loss Value. That is, at what price do we admit that the trade did not do as we thought? At what price do we cut our losses?

I've heard some people don't trade with stops. They reason that the stops are too restrictive, and are actually more likely to make people lose money. But I couldn't do that. First, too scary, and second, they'd be relying on some kind of intuition as to when to get out. I don't do intuition.

Stops also allow us to define in exact terms, how much are we risking on this trade. Sometimes there is slippage though, and so you might lose a bit more than you thought.

Anyway, the beauty of forex is that the stops are automatic. The worst trade I ever did was with Options. The price was already below my Initial Stop Loss Value. But I just couldn't call the broker to get out. "It'll come back" I kept saying, as the price kept falling. Automatic stops take away that problem. When the price hits your stop, you're taken out of the trade. Perfect.

So, where are we going to put that puppy? We need to give the price enough wiggle room. On the other hand, we don't want to risk too much. It's backtesting time.

Possible values are essentially the same as for Entry Values. High, Low, Close of current bar, the value of a moving average, the lower bollinger line, low of the last X bars, etc. You can also use a specific number of pips below (or above) the entry price.