EDIT: I meant to post this into "trading discussion" not trading systems. Or even rookie talk :-)
I've been having mixed feelings about trailing my SL with my strategy that I trade on the 5M when my average stop loss is between 5-10 pips. I'd like to demonstrate my issue with an example:
I enter a short trade, SL is 7 pips, no fixed take profit target as I trail my stop loss. Price moves 11 pips into profit in two straight candles, reaching roughly 1:1.5 RR. No "problem zone" detected by me that could push price back up. Now here are the problems:
A) Since my SL is 7 pips and price moved 11 pips into profit in two straight candles, I basically do not have a technical place to put my SL.
B) Even if I did, where would I put it? Let's assume I put it to break even, which is okay, but I am already up 1:1.5R and being taken out for break even after having a 1:1.5 "in the bag" already, that'd be problematic and frustrating. Also, putting it to BE wouldn't probably be smart as price could come back and retest the area where I entered.
C) Since there is no technical place to move my SL (i.e. a new swing, above a resistance, etc.), I do not move my SL at all, leave it at 7 pips and wait until price action confirms a place to move it.
What are the problems with A, B or C?
A) I really want to go at least to break even or even lock in some profits, but there isn't enough distance created and a retrace could take me out for BE and continue the move down or take me out for a tiny profit and then continue the move down.
B) Putting to BE might be a lose-lose situation as I could be taken out and price continues further short after being taken out as there isn't enough distance created.
C) Not moving SL to break even or into profit and THEN be taken out for a full loss whereas I had a 1:1.5 is just plain dumb, isn't it? It can happen of course even if I haven't identified a problem zone that could reverse price.
There could be one simple solution to this - testing! However, I did and I was not able to really conclude what would make most sense due to mixed results since every trade feels unique in it's own way.
Would trading on a much higher time frame be a solution? Definitely, it would as pip-wise I had to wait longer until I can move my SL. But that is not an option for me as I simply believe that there must be a solution to this exact problem on lower time frames as well.
Would going for a fixed target be a solution as well? Sure, but I trade the trend, buying/selling the dips and often looking to catch the runners. Suggestions on that are also welcomed!
Any feedback is appreciated! Hopefully I can receive some clues how to tackle this problem as it's been bothering me for a longer time already. I believe that at the end it is up to my strategy and I have to decide for myself, but listening to others ideas and input could help potentially help me finding a final solution to this.
I've been having mixed feelings about trailing my SL with my strategy that I trade on the 5M when my average stop loss is between 5-10 pips. I'd like to demonstrate my issue with an example:
I enter a short trade, SL is 7 pips, no fixed take profit target as I trail my stop loss. Price moves 11 pips into profit in two straight candles, reaching roughly 1:1.5 RR. No "problem zone" detected by me that could push price back up. Now here are the problems:
A) Since my SL is 7 pips and price moved 11 pips into profit in two straight candles, I basically do not have a technical place to put my SL.
B) Even if I did, where would I put it? Let's assume I put it to break even, which is okay, but I am already up 1:1.5R and being taken out for break even after having a 1:1.5 "in the bag" already, that'd be problematic and frustrating. Also, putting it to BE wouldn't probably be smart as price could come back and retest the area where I entered.
C) Since there is no technical place to move my SL (i.e. a new swing, above a resistance, etc.), I do not move my SL at all, leave it at 7 pips and wait until price action confirms a place to move it.
What are the problems with A, B or C?
A) I really want to go at least to break even or even lock in some profits, but there isn't enough distance created and a retrace could take me out for BE and continue the move down or take me out for a tiny profit and then continue the move down.
B) Putting to BE might be a lose-lose situation as I could be taken out and price continues further short after being taken out as there isn't enough distance created.
C) Not moving SL to break even or into profit and THEN be taken out for a full loss whereas I had a 1:1.5 is just plain dumb, isn't it? It can happen of course even if I haven't identified a problem zone that could reverse price.
There could be one simple solution to this - testing! However, I did and I was not able to really conclude what would make most sense due to mixed results since every trade feels unique in it's own way.
Would trading on a much higher time frame be a solution? Definitely, it would as pip-wise I had to wait longer until I can move my SL. But that is not an option for me as I simply believe that there must be a solution to this exact problem on lower time frames as well.
Would going for a fixed target be a solution as well? Sure, but I trade the trend, buying/selling the dips and often looking to catch the runners. Suggestions on that are also welcomed!
Any feedback is appreciated! Hopefully I can receive some clues how to tackle this problem as it's been bothering me for a longer time already. I believe that at the end it is up to my strategy and I have to decide for myself, but listening to others ideas and input could help potentially help me finding a final solution to this.