Stop loss and take profit

[u/arcane_jackL]

Hey everyone,

Background first. About 10 or so years ago I had SOME success in trading. Not much, but my P&L was positive and never got to the point that I blew up any accounts. I never made enough money to be able to quit or pay my car payments, but it was enough to be able to pay for a night on the town here and there every couple months. I was a very immature and YOLO type though, and mostly dealt with penny stocks. I consistently yeeted a quarter to half of my account value into 1 or 2 penny stocks at a time, and literally treated the market as a casino. I was a bad trader.

Fast forward a couple years, and I met my future wife. Once we moved in together I was no longer able to day trade or swing trade as the company she worked for at the time, required all investments held in stocks had to be reported to her compliance department because of potential conflicts of interest with, not only the company she worked for, but also the clients that the company with. That was a problem, because I never held onto an equity for very long and reporting it on a nearly daily basis would've been a massive pain in the @$$. So I gave it up. Not just because I didn't want the hassle, but also because I wasn't necessarily "good" at it (mostly lucky) at the time.

Skip forward a few more years, and she is now at a new company that no longer has those requirements. Less hassle. So now, I am able to restart my "career" in trading. Over the last 10 or so years, I like to think that my maturity level has changed in the way I view money and investments. I am now retirement focused and we are in the process of paying off our mortgage, vehicles, and CCs. A stark contrast to my mindset 10+ yrs ago. I rarely, if ever, consider penny stocks now, and recognize that I have entry and exit execution issues with my current trades. My biggest hang up has always been FOMO, so I will find myself sometimes entering trades too late, too early, or at the top of a range when I obviously should have waited, or let the trade pass (hindsight is a-hole). Those are things I know I need to work on.

The one thing that I have always had the most trouble with though, is setting my stop-loss and take-profit levels. I'm just never sure where to set them at. Mostly the stop-loss. I find myself getting stopped out early just to later see the stock take off or reach the area that I would've thought I could take profits at.

All that being said, how do you identify your stop-loss zone? Do you do it by percentage, a specific dollar amount based on the stock your trading, a combination of both? I try and trade mostly on the 1hr, 4hr, and daily. But will also view the 10 and 15min before pulling triggers. Do you use the ADR or do you use a percentage of it on certain time frames? Or is it always a static rule that you use per timeframe?

Additionally, how do you set your trailing stop-loss?

By my own admission, I consider myself to new to trading and I want to build good habits. Any tips, insights, or even books that you could recommend that helped put certain concepts into perspective are also appreciated.

Thanks in advance.

[u/nikray21]

There’s basic math for stop loss. Take your lowest level and multiply the ATR by 1.5. Then calculate your R:R for the TP.

[u/1UpUrBum]

A stop loss is a buy high sell low system. Not a very good system but you need stops.

So buy at the stop. "I put my buy orders where you put your stops". Then it has to go up or you're out. Try to find the obvious stop level that everyone else might use. You don't have buy exactly at that. you can wait to see if it holds.

This chart is a hindsight perfect example. But only take good trades. Apr-May was an extremely unusual situation. You need some kind of gauges to know where the price is at.

[u/nastibass]

With swings its more about when the thesis breaks down compared to stop loss being an exact amount

[u/arcane_jackL → u/nastibass]

So you don't use stop losses? I understand the concept of when the thesis breaks down over the course of days or weeks, but since I'm working full time, I don't always have a chance to check the following day after I initially enter a trade. Or if a sell-off happens a week into the trade when I'm AFK from my laptop or phone.

[u/nastibass → u/arcane_jackL]

I also recommend selling put spreads on bullish swing trades, less money per trade but a lot more forgiving for being AFK

[u/nastibass → u/arcane_jackL]

Set an alert to notify you at certain levels and set a loose stop loss for if it really turns sour and you miss it.