Where to Place your Stop Loss and Take Profit Tutorial

Summary

In this video, the speaker explains how to set stop-loss and take-profit levels effectively for consistent profitability in day trading. Focusing on the EUR/USD pair and using three moving averages (21-period, 50-period, and 200-period), the speaker demonstrates how to place short trades below the 21-period moving average and set stop-loss above it. The strategy emphasizes a simple 1:2 risk-to-reward ratio and the importance of trusting your analysis. The video also warns against trading during market consolidation and advises beginners to walk away once trades are set, avoiding emotional decision-making.

Takeaways

• 😀 Tight stop-loss settings can lead to unnecessary stop-outs. It's important to set them comfortably above key moving averages.
• 😀 Use a 1:2 risk-to-reward ratio for each trade to maintain a balanced risk and reward strategy.
• 😀 Only trade in the direction of the trend. In a downtrend, focus on short positions.
• 😀 Set your stop-loss just above the next relevant moving average to avoid getting stopped out prematurely.
• 😀 Avoid trading during periods of market consolidation, when moving averages are intertwined. This typically indicates a lack of clear momentum.
• 😀 Always let your trades play out without watching every fluctuation. Avoid emotional decision-making based on short-term price action.
• 😀 When the market is trending, focus on the most recent moving averages (21, 50, 200 periods) to guide trade entries and exits.
• 😀 Trust your analysis and resist the temptation to close trades early based on fear or anxiety about short-term losses.
• 😀 When a market trend starts to reverse, consider adjusting your approach and look for long positions if the price crosses above key moving averages.
• 😀 For beginners, stick to simple strategies like the 1:2 risk-to-reward ratio and use moving averages as guides for stop-loss and take-profit levels.

Q & A

What is the main problem that traders face according to the video?

Traders often struggle with setting proper stop-loss and take-profit levels, specifically having their stop-loss set too tightly.

What is Artie's primary recommendation for setting a stop-loss?

Artie recommends keeping the stop-loss comfortably above the 21-period moving average, not too tight. For added safety, it can be set above the 50-period moving average.

What moving averages does Artie use in his strategy?

Artie uses three moving averages: the 21-period, the 50-period, and the 200-period moving averages.

Why does Artie suggest a 1:2 risk-to-reward ratio?

A 1:2 risk-to-reward ratio is suggested because it helps ensure that the potential reward outweighs the risk, making the strategy more profitable in the long run.

When should a trader avoid placing trades according to Artie?

Traders should avoid placing trades when the market is consolidating, and the moving averages are intertwining, as this indicates a lack of momentum.

What does Artie mean by 'clear and concise movement of fanned-out moving averages'?

Artie means that the moving averages should be spread apart, showing clear momentum in the market, which is ideal for trading.

Why does Artie advise not to look at previous market structure such as higher highs?

Artie advises not to focus on previous market structures like higher highs when the market is trending strongly because the current trend, indicated by the moving averages, should be the primary focus.

What does Artie suggest doing if a trade gets stopped out?

If a trade gets stopped out, Artie advises moving on and looking for the next trade, as part of maintaining discipline and trusting the strategy.

How should a trader handle anxiety during a trade, according to Artie?

Traders should avoid letting anxiety and fear dictate their actions. They should trust their analysis, set their stop-loss and take-profit, and allow the trade to play out.

What should a trader do once a trade is set, based on Artie’s advice?

Once a trade is set, Artie advises walking away from the trade and not constantly monitoring the price action to prevent emotional decision-making.