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Where to Put Your Stop Loss

Where to put your stop loss
Where to put your stop loss

So I talked about β€œWhat is R in Trading” and why it is so important to understand. I hope I made clear that R lets you focus on and manage Risks by always setting a stop-loss order to take you out of a position automatically if things turn against you. Now, after writing that I was thinking: Where would I place my stop loss? How do I do it? And can I explain how I usually place my stop-loss orders? Interested in knowing how I do it? I will give it a shot and do my best to explain it to you.

The most basic rule I use for placing a stop-loss order on my trades is this:

I want to be taken out of the trade automatically when the market shows me that my initial idea or reason for entering the trade, is no longer valid. Continue reading “Where to Put Your Stop Loss”

What is R in Trading?

Risk
Risk

And Why is R So Important to Understand?

R in Trading is an objective way to think about success or failure in a trade. R expresses the (possible) return on a trade as a multiple of the risk taken on by that trade.

In my trading log, I register the amount of R I make. Also in my trading videos and ideas, I always talk about targets, for example, as 2R or 3R. You may have wondered why I am doing that. Why don’t I just talk about pips, points, or dollars risked, won or lost on a trade?

To answer these questions in full, we need to dive more deeply into the concept of R in trading. We will look into Risks, Returns, Probabilities and how these relate. Let’s go! Continue reading “What is R in Trading?”

Trading with Japanese Candlestick Charts

Japanese candlestick charts are arguably the most commonly used charts. It has not always been that way. Candlestick charting techniques were only introduced to western traders in the late 70s by Steve Nison.

A bit of history of Candlestick Charting

Candlestick charting was invented by a rice merchant named Munehisa Homma in Kyoto, Japan in the late 1700s. The merchant made a fortune trading rice and rice warehouse receipts, the first futures contract ever, using only historical daily price information that he visualized using what we now call Candlestick Charts. The Japanese Candlestick Charts have since then only been used by Japanese traders until the American Steve Nison introduced the techniques to the West in the late 70s. He is still the Western authority on Candlestick Charting. You can find out more about him on www.candlecharts.com. I have one of his books:

Japanese Candlestick Charting Techniques
by
Steve Nison

Continue reading “Trading with Japanese Candlestick Charts”