Where do I place my stops on EMINI SCALPS

[mikeval]

Hi i have been trading NQ for approx 6 months there are periods when i make quite a bit of money but always 1 trade wipes me out i trade NQ i go for 2 points where should my stop be? it seems if i had a 2 point stop id get stoped out by just a spike. Can anyone please help me....

[DuaneG]

Hi Mike,

It sounds like you need to take a look at the risk/reward ratio of your trading style. Before we look the stop loss portion of this, you should first define what kind of ratio is both achievable and profitable. By risk/reward, I am referring to the amount of money you are willing to lose on any particular trade and the profit target you are looking for on any particular trade.

(i.e.) Let's say that an acceptable loss for a particular trade is 2 points. If we are shooting for a 3-1 risk reward ratio, our upside target would be 6 points. If the ratio were 2-1, the profit target would be 4 points of possible upside.

Basically we want to offset any possible loss with a gain that is 2 or 3 times the amount of that loss. By adjusting the risk to reward ratio, we are insuring that we can have 2 losing trades and still be at a breakeven point, or three losing trades, whatever the ratio may be. By systematically setting up the money management aspect of your trading, you'll stack the odds in your favor by letting the statistics and laws of probability work for you, not against you. Hope this gets you pointed in the right direction.