Confluence stop loss

The confluence stop is the most commonly used stop loss. Traders often use moving averages, support and resistance levels, previous troughs, Fibonacci retracement levels, trendlines, and price channels to find confluence stops.

However, this method has a disadvantage in that these stops often focus on important areas and it is difficult to determine a reasonable price to place the stop loss. If you find that the price continually crosses your stop loss by a few pips and then turns, then you should add other confluent stop loss levels or add some cushioning to your stop-loss strategy.

Stop-loss according to price movement

Volatility-based stops are commonly used by professional traders. This is a stop-loss strategy based on changing market conditions. When price volatility is high, traders use a greater stop loss. When price volatility is lower, traders often use a more conservative stop loss.

The stop loss and profit are linked. Therefore, when placing further stop-loss orders, during times of high volatility, traders should also broaden their profit targets to secure RR ratios and capture larger price movements. On the other hand, when the level of price volatility is low and the profit target should also be set closer because the price will not move far and the strategy is difficult to achieve profitability.

The figure below shows the EUR / USD chart with the ATR indicator:


When the ATR is high it signals that the price volatility in the past is relatively high and that the price tends to move further. Traders can also use VIX (see picture below) to measure the price movement of the market.


Set stop-loss based on time

Time-based stop loss is also used by traders. It is the stop-loss that requires flexibility in usage.

For example, when you execute a buy order, but the market is not responding and its price fluctuates around your entry point, your idea of a trade is not successful. In such cases, traders should exit their trade and wait for the next trade signal, instead of waiting and hoping that the price starts to move.

How to achieve stop loss based on time will be to help traders exit from trades at times when the market is not strong or sideways.

An example of how to place your stop loss based on time is if you buy a stock due to different price action patterns or entry signals, but the trading is not going as you would expect, in In such case one should exit the transaction. It is often said that stop loss is important, but it is even more important to know WHEN to stop Stop loss can be a way to help you achieve this.

Time-based stop loss prevents you from encountering uncertain and unexpected trading situations.

The good news for us traders is that all of these stop-loss strategies can be effectively combined to make our stop loss better.

You can use the confluent stop loss as a basis to locate the stop loss from the start (don't forget to add a few pips at the stop loss). Volatility stops and timed stops are factors that reinforce your stop loss even more firmly.