{"id":9568,"date":"2022-10-12T07:55:54","date_gmt":"2022-10-12T07:55:54","guid":{"rendered":"https:\/\/mdr.foobrdigital.com\/?p=9568"},"modified":"2022-10-12T07:55:54","modified_gmt":"2022-10-12T07:55:54","slug":"how-to-use-fibonacci-to-place-your-stop-so-you-lose-less-money","status":"publish","type":"post","link":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/2022\/10\/12\/how-to-use-fibonacci-to-place-your-stop-so-you-lose-less-money\/","title":{"rendered":"How to Use Fibonacci to Place Your Stop so You Lose Less Money"},"content":{"rendered":"\n

Probably just as important as knowing where to enter or take off profits is knowing where to place your stop loss<\/strong>.<\/p>\n\n\n\n

You can\u2019t just enter a trade based on Fib levels without having a clue where to exit.<\/p>\n\n\n\n

Your account will just go up in flames and you will forever blame Fibonacci, cursing his name in Italian.<\/p>\n\n\n\n

In this lesson, you\u2019ll learn a couple of techniques to set your stops when you decide to use them trusty Fib levels.<\/p>\n\n\n\n

These are simple ways to set your stop and the rationale behind each method.<\/p>\n\n\n\n

Method #1: Place Stop Just Past Next Fib<\/h2>\n\n\n\n

The first method is to set your stop just past the next Fibonacci level.<\/strong><\/p>\n\n\n\n

If you were planning to enter at the 38.2% Fib level, then you would place your stop beyond the 50.0% level.<\/p>\n\n\n\n

If you felt like the 50.0% level would hold, then you\u2019d put your stop past the 61.8% level and so on and so forth. Simple, right?<\/p>\n\n\n\n

Let\u2019s take another look at that 4-hour EUR\/USD chart we showed you back in the\u00a0Fibonacci retracement lesson.<\/p>\n\n\n\n

\"Aggressive<\/a><\/figure>\n\n\n\n

If you had shorted at the 50.0%, you could have placed your stop loss order just past the 61.8% Fib level.<\/p>\n\n\n\n

The reasoning behind this method of setting stops is that you believed that the 50.0% level would hold as a resistance point. Therefore, if the price were to rise beyond this point, your trade idea would be invalidated.<\/p>\n\n\n\n

The problem with this method of setting stops is that it is entirely dependent on you having a perfect entry.<\/p>\n\n\n\n

Setting a stop just past the next Fibonacci retracement level assumes that you are really confident that the support or resistance area will hold<\/strong>. And, as we pointed out earlier, using drawing tools isn\u2019t an exact science.<\/p>\n\n\n\n

The market might shoot up, hit your stop, and eventually go in your direction. This is usually when we\u2019d go to a corner, and start hitting our head on the wall.<\/p>\n\n\n\n

We\u2019re just warning you that this might happen, sometimes a few times in a row, so make sure you limit your losses quickly and let your winners run with the trend.<\/p>\n\n\n\n

It might be best if you used this type of stop placement method for short-term, intraday trades.<\/p>\n\n\n\n

Method #2: Place Stop Past Recent Swing High\/Low<\/h2>\n\n\n\n

Now, if you want to be a little safer, another way to set your stops would be to place them past the recent Swing High or Swing Low<\/strong>.<\/p>\n\n\n\n

For example, when the price is an uptrend<\/em> and you\u2019re in a long position, you can place a stop loss just below the latest Swing Low <\/strong>which acts as a  potential support<\/strong> level.<\/p>\n\n\n\n

When the price is in a downtrend<\/em> and you\u2019re in a short position, you can place a stop loss just above the Swing High<\/strong> which acts as a potential resistance<\/strong> level.<\/p>\n\n\n\n

This type of stop loss placement would give your trade more room to breathe and give you a better chance for the market to move in favor of your trade.<\/p>\n\n\n\n

\"Conservative<\/a><\/figure>\n\n\n\n

If the market price were to surpass the Swing High or Swing Low, it may indicate that a reversal of the trend is already in place.<\/p>\n\n\n\n

This means that your trade idea or setup is already invalidated and that you\u2019re too late to jump in.<\/p>\n\n\n\n

Setting larger stop losses would probably be best used for longer-term, swing-type trades, and you can also incorporate this into a \u201cscaling in\u201d method, which you will learn later on in this course.<\/p>\n\n\n\n

Of course, with a larger stop, you also have to remember to adjust your position size accordingly.<\/p>\n\n\n\n

If you tend to trade the same position size, you may incur large losses, especially if you enter at one of the earlier Fib levels.<\/p>\n\n\n\n

This can also lead to some unfavorable\u00a0reward-to-risk\u00a0ratios, as you may have a wide stop that isn\u2019t proportional to your potential reward.<\/p>\n\n\n\n

So which way is better?<\/h2>\n\n\n\n

The truth is, just like in combining the Fibonacci retracement tool with support and resistance, trend lines, and candlesticks to find a better entry, it would be best to use your knowledge of these tools to analyze the current environment to help you pick a good stop loss point.<\/p>\n\n\n\n

As much as possible, you shouldn\u2019t rely solely on Fibonacci levels as support and resistance points as the basis for stop loss placement.<\/p>\n\n\n\n

Remember, stop loss placement isn\u2019t a sure thing.<\/p>\n\n\n\n

But if you can tilt the odds in your favor<\/strong> by combining multiple tools, it could help give you a better exit point, more room for your trade to breathe, and possibly a better reward-to-risk ratio trade.<\/p>\n","protected":false},"excerpt":{"rendered":"

Probably just as important as knowing where to enter or take off profits is knowing where to place your stop loss. You can\u2019t just enter a trade based on Fib levels without having a clue where to exit. Your account will just go up in flames and you will forever blame Fibonacci, cursing his name in […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[835],"tags":[],"_links":{"self":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9568"}],"collection":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/comments?post=9568"}],"version-history":[{"count":0,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9568\/revisions"}],"wp:attachment":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/media?parent=9568"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/categories?post=9568"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/tags?post=9568"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}