Hello and welcometo another edition of the bulls vs the bears. Last time we tried to Get The Hang of Using Sop Loss and Take Profit in Forex Trading. Today we are going to jazz things up a little. We are going to learn a few stop loss and take profit strategies that you can take to the bank.
We are going to learn about some popular price action strategies and where to place your stops in these trading strategies Like I alluded in our last lesson, your prosperity as a forex trader is dependent on whether you use a stop loss or take profit. Failure to do those, and your Forex trading account could take a nuclear hit, the size of the Grand Canyon. So we’ll get thing started with the stop loss strategies First off:
Pin Bar Stop Loss and Take Profit Placement
The pin bar is a very popular trading strategy representing a strong rejection and reversal price. The attributes of the pin bar are as follows: a long upper or lower tail, wick, or shadow, and a smaller body or real body.
Now I can hear someone saying”Yeah Yeah! I know all all that? But where do I place my stop loss?” Well the logical place to place your stop loss above or below the longer candlewick of the pin bar. For the trade to be successful, you should leave some breathing room between the entry level and the end long candlestick. If price goes beyond the longer candle, the trade becomes a bust.
For take profit you you close the trade when the candlestick breaks the line of support.
Let’s look at an illustration of the pin bar stop placement and take profit placement.
Right in front of us is the the stop loss and take profit in the pin bar set up. On the bullish side the stop loss is placed just below the long tip of the pin bar. While the on the bearish side the pin bar is is placed at the tip as suggested by the red arrow. So if you see such set ups in the pin bar , you know what to do.
Wanna learn more about the pin bar? Look up How To Prosper from Trading the Pin Bar
Next up is:
Inside Bar Stop and Take Profit Placement
If you know the inside bar as well as I do. you’d know that it’s a high probability strategy with huge rewards. Naturally as a high probability trade, you dont need that many stop losses. The inside bar setup is better traded in the daily frame and in strong trending markets-especially where the potential for strong breakouts exists;
Now the inside bar itself is tucked in front the preceding candle, popularly known as the mother bar. The inside bar typically has a higher low(HL) and lower high(LH). In smaller time frames it shapes like a triangle.
Now I can hear someone saying”Ok. We’ve heard all that. Now how about the stop loss and take profit placement?” Well, rumour has it that you place your stop loss just below the mother or lower high(LH) depending on whether you are going long or short. As for the take profit, you buy when the candles break the key areas, be it line of support or line of resistance. Let’s look at an illustration of the inside bar strategy
Now here is a bullish layout of the inside bar pattern. As you can see the stop loss is placed at the bottom the inside bar as indicated by circle. If it were a bearish set up you’d have placed it at the top of the inside bar. With the take profit, the buy order is placed after it breaks the line support as indicated by the green arrow. So when you see this inside bar set up you know what to do.
Now let’s look at the bearish set up.
Ladies and gentlemen this is a bearish set up of the Inside Bar Pattern. As you can see the stop loss is placed on the high(top) of the mother bar. While the take profit is placed just as the bearish candle breaks the line of resistance. So when you see this set up you know what to do.
Wanna know more about the Inside Bar pattern? Look up Trading The Inside Bar With Gusto
That’s a wrap for “A Few Stop Loss and Take Profit Strategies You Can Take To The Bank.” As I said in the last post, Every trade you enter has the potential of making you a profit or blowing your account into the ozone. With that in mind you need to weigh the risk of the trade as well as its potential reward. So if you want to be a profitable forex trader, make use of your stop loss and take profit orders.
Til next time take care.
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