Stop Loss Placement: Let Your Trade Cook!

Intro

I tried to talk through stop-loss placement in 3 minutes here. I do not think justice was done. So let's take a look at exactly what I mean when I say "Let Your Trade Cook". Proper stop-loss placement is critical to a successful trading plan.

Don't Place Your Stop Like Everyone Else

You are guilty of this, if you have been stopped out many times just to see the price move immediately back in your favor. The picture below represents a bunch of pullbacks some long and some short and it has been color-coded to define entries combined with stop losses.

• Blue = Entry
  
• Black = Typical Stop
  
• Orange = A Good Stop To Let Your Trade Cook
  
• Red = An Aggressive Stop To Let The Trade Cook
  

Conclusion
Hopefully, the video along with this image provides you with a better system for discretionary stop losses. I tend to favor the idea that just above or below a momentum bar in the previous swing as my stop loss.