User Name: Password:      Register - Lost password?
Search In...

         A Live Learning/Help Forum
             VIDEOS -
                 Mov Avgs (6)
         Currency Futures
         Market Terminology
         Posting a Forum Chart
         Trade Execution
         Trade Management
         Trading Fundamentals
             Economic Indicators
             Flows/Central Banks
             Risk Aversion
         Trading Psychology
         Trading Technicals
         Trading Techniques

         Module 1: The Basics of Forex Trading
         Module 2: The Logistics of Forex Trading
         Module 3: The Logistics of Forex Trading Part 2
         Module 4: What Moves the Forex Market
         Module 5: Trading the US Dollar
         Module 6: Trading the Euro
         Module 7: Trading the Japanese Yen

  VIDEOS: Trading Basics
         Module 1: Technical Analysis Basics
         Module 2: Chart Patterns
         Module 3: Technical Indicators
         Module 4: Candlestick Chart Formations
         Module 5: The Psychology of Trading
         Module 6: Money Management
         Module 7: Position Sizing
         Module 8: Intro to Fundamental Analysis
         Module 9: Economic Releases that Move the Markets
         Module 9a: Pulling It All Together

  Help/Learning Forum Topics

Found In....
Category Name: VIDEOS: Trading Basics
» Sub-Category Name: Module 6: Money Management
Lesson 7: Incorporating Indicators in Stop Placement

Lesson 7: Incorporating Indicators in Stop Placement

In our last lesson we learned how many successful traders look for entry opportunities which allow them to set their stop so that there are multiple support or resistance points between their entry point and stop level, and few if any support or resistance points between their entry price and their target. In today’s lesson we are going to look at another factor that many traders use when deciding where to place their stops, the use of technical indicators.

As you hopefully remember from watching my previous lessons we have already covered two indicators and gone over specific trading strategies on how they can be used to set stops which are the Average True Range and the Parabolic SAR. While these indicators were designed specifically to help traders gauge where to place their stops, many of the other indicators which we have looked at using to pick trade entry points can also be used to decide when to exit a trade.

With this in mind the question then becomes, with all the options available how do you choose which indicator if any to look at when deciding when to exit a trade. Which indicator if any you choose to include in your money management strategy for setting stops is going to depend largely on the type of stock, futures or forex trading strategy that you are trading. As a general rule however if you use an indicator to signal for example a buy entry on a trade most traders will keep an eye on that same indicator and take into account when that same indicator signals to exit a trade.

As an example of this, lets say that your analysis of the Average Directional Index (ADX) shows that the chart of x is about to start a nice trend and you decide to place a trade on that analysis. Using the knowledge you have gleaned from our lessons on stops so far you also pick a level for your stop which has some nice protection and is close enough that it fits within your two percent loss limit. During this trade however if the Average Directional Index (ADX) which is the indicator you used primarily to enter the trade begins to signal that the trend is weakening and the market is about to range, should you remain in that trade? The answer to that question is going to depend on the strategy and what other things are going on in the market at the time, but I would say at minimum most successful traders would take this into account when deciding whether or not to continue with the position, regardless of whether their stop had been hit or not.

Lastly on this point there is one indicator that so many traders watch that many traders will at least keep an eye on what happens with this indicator and that is the 50 and the 200 day moving average. These indicators are in general thought to be representative of the overall trend in the market and a break above or below these levels and/or a crossing of the 50 day moving average above/below the 200 day moving average is normally seen as significant for a market and as such many traders will take this into account and place their stops accordingly.

As you probably have noticed when thinking about placing stops using indicators, as you don’t know where price is going to be when your indicator signals for a trade exit, you do not have a hard stop in the market, are in the very bad position of not being protected in your trade. This is why, as we have talked about many times in our other lessons, that if this method for setting stops is used it should always be used in conjunction with another method which allows you to set a hard stop and stays within the 2% loss limit rule we have established.

This concept of the stop being a sort of “moving target” is a nice lead in to our next concept and lesson where we are going to be talking about what is known as a trailing stop.



Actionable trading levels delivered LIVE to YOUR charts

GVI Trading. Potential Price Risk Scale
AA: Major, A: High, B: Medium

Mon 27 May 2019
AAGB/US- Holiday
Tue 28 May 2019
A 14:00 US- Consumer Confidence
C 13:00 US- Case-Shiller
Wed 29 May 2019
A 08:55 DE- Employment
AA 18:00 US- BOC Decision
A 18:30 US- EIA Crude
Thu 30 Mar 2019
AAEZ/CH- Holiday
A 12:30 US- Weekly Jobless
Fri 31 Mar 2019
AA 10:00 EZ- Flash HICP
A 12:30 US- Personal Income, Spending, Deflator
AA 14:00 US- Final Univ of Michigan

Global-View Affiliate Program

We are starting an affiliate program to market some of our products.

Send me an email if you would be interested or if you know someone who would like to be an affiliate. Generous commissions payout for those accepted.

Put the word "affiliate" in the email subject line.

Contact us

Start trading with forex broker Markets Cube


Retail Forex Brokerage Changing!

Are you looking for your first broker or do you need of a new one? There are more critical things to consider than you might have thought.

We were trading long before there were online brokers. Global-View has been directly involved with the industry since its infancy. We've seen everything and are up-to-data with recent regulatory changes.

Our Best Brokers listing section includes:Forex Broker Reviews, Forex Broker Directory, Forex Broker Comparisons and advice on How to Choose a Forex Broker

If would like guidance, advice, or have any concerns at all ASK US. We are here to help you.

SEE Our Best Brokers List

Currency Trading Tools

  • Live rates, currency news, fx charts. 

  • Research reports and currency forecasts.

  • Foreign Exchange database and history.

  • Weekly economic calendar.

Directory of  Forex trading tools

Terms of Use    Disclaimer    Privacy Policy    Contact    Site Map

Forex Forum
Forex Trading Forum
Forex Forum + forex rates
Forex Forum Archives
Forex Forum RSS
Free Registration

Trading Forums
Currency Forum Guide
Forum Directory
Political Forum
Forex Brokers
Compare Forex Brokers
Forex Broker News
Forex Broker Hotline

Forex Trading Tools
Currency Trading Tools
Forex Database
FX Chart Points
Risk/Carry Trade Chart Points
Economic Calendar
Quicklinks to Economic Data
Currency Futures Swaps
Fibonacci Calculator
Currency Futures Calculator

Forex Education
Forex Learning Center
FX Trading Basics Course
Forex Trading Course
Forex Trading Handbook

Forex Analysis
Forex Forecasts
Interest Rate Forecasts
Central Bank Forecasts

FX Charts and Quotes
Live FX Rates
Live Global Market Quotes
Live Forex Charts
US Dollar Index Chart
Global Chart Gallery
Daily Market Tracker
Forex News
Forex Blog
Forex News
Forex Blog Archives
Forex News RSS
Forex Services
The Amazing Trader
Forex Opportunities
Forex Affiliates
Forex CopyTrading
GVI Forex