Hello everyone, this content is going to explain how to set stop losses. Stop losses are a prerequisite for our trading and also a prerequisite for capital management.

1. Mistakes to Avoid When Setting Stop Losses

Firstly, placing the stop loss too close. If it's set too close, the market movement is limited, and it can easily trigger our stop loss, resulting in not giving the market enough room to operate.

Secondly, setting the stop loss too far away. When the stop loss is set far away, people might feel that their positions are safer, and as long as there is a wave-like movement, they can make a profit and exit. However, because your stop loss is set far away, you are prone to causing unnecessary stop losses.

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So, setting the stop loss too close is not reasonable, and setting it too far away is also not reasonable. How should we set the stop loss to be relatively reasonable?

2. Reasonable Stop Losses

1. Place it outside the normal price fluctuation range.

When we set a stop loss, you can consider what the current market trend is like. You can consider where the previous lows and highs are. So, when we set a stop loss, it should be outside the normal fluctuation range, slightly above the previous lows and highs, adding a bit of profit space. This can appropriately prevent false breakouts, and the stop loss setting will be relatively more reasonable.

2. Stop Losses During Violent Market Fluctuations

They should be set slightly wider than the normal stop loss range. This situation usually occurs in data-driven markets or during the U.S. market hours. Especially in data-driven markets where the fluctuations are intense, slippage is very likely to occur, so it's better to set it more leniently. When the market returns to normal, we can then adjust our stop loss back to our normal position.3. When is it necessary to cut losses?

First scenario: Capital management-based stop-loss. This means I can consider how much I am willing to lose per trade. Once the loss reaches that amount, I will unhesitatingly close my position.

Second scenario: Technical analysis-based stop-loss. This refers to the high or low points before the inflection points mentioned earlier, the turning points within a trend. If the price breaks through that level, it indicates the direction is wrong, and I will set a reasonable stop-loss at that position.

Third scenario: Psychological stop-loss. This means determining when I can psychologically tolerate cutting losses, whether it's a loss of $500 or $800. When it reaches our expected tolerance level, I will close the position. However, psychological stop-loss is highly uncertain, so it is not generally recommended.

Fourth scenario: Catastrophic stop-loss. This is more applicable to contrarian trading. Especially for the Martingale trading strategy I discussed earlier, as the trade progresses, the volume increases, and so does the floating loss. When the volume is large and there is a sudden data-driven market movement, it is crucial to set a catastrophic stop-loss to prevent large gaps due to the data.

At this point, we should set the stop-loss at a position further away from our position, aiming for an overall loss of 15%, and set the stop-loss level based on the total volume.

4. How to set stop-loss for intraday trading?

The above are some common methods of setting stop-losses, but the calculation method for stop-loss in intraday trading is different. I will calculate the amount I should lose based on my position size and the space for my stop-loss.

For example, if I have a principal of $10,000 and I anticipate a loss of $100 per trade, I will determine the technical stop-loss position based on my current open position and then calculate the appropriate position size.From the entry position to my technical stop-loss position, the loss should be one hundred US dollars, which is a core point of our trading.

By determining the unit of entry, the position of entry, placing the stop-loss within the technical level, and then calculating its space, and after calculating that my single loss is 1%, I determine how much my position should be, and then control our stop-loss with the position, which is a core point of our intraday trading.

15-minute moving average trading, including breakout trades, including our counter-trend rebound grabs, all use this method of stop-loss. Only the counter-trend Martingale trading logic do we use the catastrophic index.

Well, that's all for today's intraday trading stop-loss.