How to set an effective stop loss point?

Stop loss is a very important concept for traders. Some people say that trading must set a stop loss, while others think that relying solely on stop loss is a sign of lack of confidence. However, in any case, setting a stop loss is to protect the trader's funds.

So, how do you set a stop loss?

First of all, you can consider setting a stop loss according to the key position. A key position refers to a position where you think there is a high probability of a turning point, or a position where the stop loss profit and loss are relatively large. Specifically, find a key position that suits you to set a stop loss according to your trading system and risk tolerance.

Secondly, you can choose to set the effective stop loss level according to the period of the order. This needs to be determined according to the period of the trade. If you are trading in a shorter period, it may be more effective to set the stop loss at the position of the longer period. The advantage of setting the effective stop loss level is to avoid the early exit caused by market noise, but it is also possible to cause losses when entering the market in the opposite direction. It is recommended to choose the effective stop loss level when the system prompts the high probability of accuracy. When testing a position against the trend, you can reduce the position and stop loss at the same time.

In addition, stop losses can also be set based on historical trade records. By counting the trade history, the average stop loss points can be obtained to determine the risk and reasonableness of the current trade. If it is found that the stop loss points of the current trade far exceed the usual stop loss points, it may be necessary to reconsider the entry position to avoid high-risk trades.

In short, setting a stop loss is to avoid risks and protect the safety of funds. The specific stop loss setting needs to be determined according to the individual's trading system and risk tolerance. There is no fixed setting method suitable for all traders, and it needs to be adjusted according to their own situation. Before entering the market, it is necessary to consider the cycle and use of the trade to determine the entry position within the stop loss range, so as to avoid risks. Trading is to do a work of avoiding risks, and stop loss is a lock to ensure the safety of our trading.