Stop Loss Strategies; FOLLOW UP

This is to follow up on a thread started yesterday.

EUR/USD 60 minute chart
Indicators:
8 SMA, 21 SMA, Bollinger Bands (20, 2)

Short taken at 1.2707
Stop loss at 1.2752
Target 1.2450

Ordinarily I would set a Stop Loss at prior resistance, (regular Horizontal Resistance), which in this case was 1.2789. That sets up a potential loss of 82 pips.

However, I cannot afford large losses, so I look to limit them when I can. Here's what I did.

The trade unfolded this way:

1. Short entered at 1.2707, Stop Loss at 1.2752 which was 21 SMA +10 pips.

2. Price rose above 8 SMA, but stayed under 21 SMA. That was okay and I didn't have to change anything, but it did get my attention. I was now vigilant for a break of the 21 SMA.

3. Price broke 21 SMA, but closed below it. At this point I was hoping it would bounce off the 21 and head down again. However, if the price closed above the 21 SMA there was a good chance that it would run up to the upper Bollinger Band.

4. Price closed above 21 SMA, so I exited the short and reversed into a long. Even if the long didn't run all the way to the upper Bollinger it should come close and I could lessen my losses.

5. Price ran up to upper Bollinger (and beyond), and I took profit of 50 pips at 1.2789.

50 pips profit minus the 22 I lost on the short left me with a 28 pip profit! Every trade should be that nice and neat!!

I hope you can see the chart I've attached clearly enough because this is tough to explain by words alone.

The 8, 21 and Bollinger have been the best I've used so far because they are fairly predictable and actually offer trade opportunites in themselves.

Try opening a 60 minute chart in any pair and study how the break of these two lines make the price run in relation to Bollinger. Other numbers I've tried have not been as reliable and I don't know why. The only thing I can think of is that 8 and 21 are Fibonacci numbers and the simple moving averages offer exactly what's going on.

You can also add in 89 SMA and 200 SMA and MACD if you're looking for trade openings.

There you have it!

I hope this helps!