Sometimes, I don't understand why a forex trader could be convinced of not having a Stop Loss while we see almost every month an unexpected uncounted impulse in the market which creates unexpected volatility.  There are no specific rule as to where you should place the stop loss, so forex traders should consider the below mentioned tips as the general rules and ask yourself if reliable Stop loss rules just for you and your trading system:

• Many forex traders place the same stop loss for all the trades they execute without even trying to measure market environment.
• Don't be scared of placing a stop loss while it is for your gain and you must know what your profit objective is.
• Stop Loss should not be too close to the current price while most of the stop loss enemies have ruined their trading accounts already just by using very close ones.
• Stop Loss should not be too far from the point you get into trade while it's better to not placing any Stop Loss rather taking an unreachable, fictional protector.
• Try to not to risk more than the points of your profit goal. Professional forex traders recommend to only take those trades which have at least 2 points of potential profit per 1 pip of potential lose, but I would say it is completely depends on the money management system that you use, as different money management systems has different recommendations for Risk & Reward.
• Sometimes a trading system does not work if you risk less than recommended 5%-7% of your total account equity. It means you trade oversize or you just entered the market when everyone else getting out of the forex market. In this case this is not your fault as it has a clear message for you "don't trade this way anymore and ask an expert to solve the problem".
• If you are convinced enough that you can make up 1 million dollar out of your 10000 dollars account by not using stop losses as you may think you are the one who knows the price will be back on its way to you instead of hitting new highs, well, simply you are wrong.
• Remember, there are no sky limits for the price of any of currencies in FOREX market - so don't be a sucker forex trader and burnt unecessarily.
• It is better to have one or two losing trades with 100 points of lose, instead of being desperate with sinking into -1000 pips of dizziness.

Where Should I place my Stop Loss?

Try these tools to define the most accurate stop loss points easily:

• Use 10 pips over/below the first Parabolic SAR spot(dot) appeared over/below the price candles for Short/Long Trades.
  Note#1: Remember you just can use 10 pips above the parabolic SAR dots as an Stop Loss point when you have a Short trade and Vice Versa.
  
• Note#2: You realized that the Stop Loss obtained from SAR is too far from the point which you want to enter the market. OK, this means you are about to enter the market very late so better to not do it.
• Use 10 pips over/below the day before yesterday's HIGH and LOW and in the case of the market has moved a lot far, use 10 pips over/below the yesterday HIGH and LOW as a Stop Loss point for your Short/Long trades.
• Use two Moving Averages of 55 EMA and 144 MA. You may place your stop loss just 10 pips below/above one of those two MAs depending on how do you set up the profit/loss game for your Long/Short trades.
  Note#: If you trade on the range market break out be aware of this kind of Stop Loss setting, and it is quite safer to use another way.
• Place the Stop Loss 10 pips over/below Bollinger Bands Upper/Lower band for Short/Long trades.
• If you use Elliot Waves theory to analyze the market:
  # Place the Stop Loss just 10 pips below the lowest point of the Second (2) wave in bullish trend when you LONG on Wave 3.
  # places the Stop Loss 10 pips below the lowest point of the 4th Wave when you take a  LONG forex trade on 5th Wave.
  # Place the Stop Loss right above/below the top/low of the previous wave when you take a SHORT/LONG forex trade based on A-B-C correctional waves.

Final Thoughts on Stop Losses

• Aforementioned suggestions are based on 4Hours chart - your strategy may change if you take forex trades on shorter time frames.
• Those ways of defining Stop Loss points has worked for me as a professional forex trader.
• 10 pips are because sometimes price hit the important support or resistance levels by more than a touch.
• The Stop Loss issue is not actually a game for forex traders, it is a "MUST" and will save you when you can do nothing, and the trade goes against you.

S.A Ghafari
IFTC Financial Studies
www.iftc.ir