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Master-Class On Stop Loss

This Twitter thread provides a master class on properly using stop losses when trading cryptocurrencies like Bitcoin. It discusses that stop losses should be based on technical analysis rather than a fixed percentage, and should be placed at the invalidation level for the trade setup once the reason for entry is invalidated. Examples are provided of different types of trade setups and how to determine the proper stop loss level based on the technical analysis for that trade. The thread emphasizes that stop losses are crucial for preventing account blowups and financial ruin for traders.

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573 views12 pages

Master-Class On Stop Loss

This Twitter thread provides a master class on properly using stop losses when trading cryptocurrencies like Bitcoin. It discusses that stop losses should be based on technical analysis rather than a fixed percentage, and should be placed at the invalidation level for the trade setup once the reason for entry is invalidated. Examples are provided of different types of trade setups and how to determine the proper stop loss level based on the technical analysis for that trade. The thread emphasizes that stop losses are crucial for preventing account blowups and financial ruin for traders.

Uploaded by

imad ali
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Emperor

@EmperorBTC

15 Tweets • 2021-02-26 16:00:11 UTC •  See on Twitter


rattibha.com 

MASTER-CLASS on Stop Loss

99% of the traders fail because they don't


understand Stop Loss.

Stop Loss is the most important topic to prevent


liquidation and avoiding bankruptcy.

This is all you need to master stop loss.

A Thread.
There are only 2 tools in trading which will prevent
you from blowing up your account.

1. Risk Management
2. Stop Loss

If you don't follow the rules of the above, YOU


WILL FAIL. Period.

In this thread, we will master Stop-Loss, in detail.


Different Charts= Different SL

A common fallacy amongst traders is that Stop Loss


has to be a certain fixed percent of loss. Eg. Fixing
Stop Loss at 5%. This is a very bad idea.

Stop loss should be based on TA alone.


Every setup is different and a fixed SL won't work.

Stop loss = Invalidation level.

Entry is made ONLY as per TA on a valid reason for


a directional move. Once the reason for the entry
has been lost, the trade must be exited.

The event at which the reason for entry ceases to


exist is the invalidation level.

Entry example.
Invalidation Point reached? GET OUT!

Stop Loss is a tool to be ABSOLUTELY used as soon


as the setup reaches an invalidation point.
Always establish the invalidation point before
entering a trade.
As soon as the invalidation event turns true, EXIT
without a second thought.
Once the reason for the entry has been lost, exit the
trade as the premise for the entry no longer exists.

If the entry was made because of a support being


confirmed, but if the support gets broken, the
reason for the entry no longer exists and hence, a
stop loss must be entered
Let us understand placing the stop Loss with the
help of few examples.
I will only be using simple Support/Resistance
reasons for entry to keep it simple.

1. Placing SL during consolidation Break-out.


Note- I Place it a little below the invalidation level
to prevent stop hunts.
2. Placing stop loss with

-Supply Demand Zone recognition


-Break-out
-Re-test Confirmation
-Supply Zone Flip
-Break-out confirmation
3. Let's try to understand a bit advanced stop loss
using
-OBV
-Volume.

Price goes up, volume doesn't.


Price goes down, volume goes us.
THIS IS BEARISH.

Price goes up, OBV doesn't.


Support is broken.
Bullish invalidation = SL Entered.

Note- This is how 2017 top was confirmed


Stop Loss is a very controversial topic as some
traders don't like to place a SL order as it could lead
to stop loss hunting.

Some traders swear by a strict stop loss order being


placed as soon as an entry is placed.

The solution to this dilemma is discussed below.

1. Place the SL BELOW the invalidation point to


avoid SL hunting by wicks.

2. Exit the trade on invalidation with using SL


manually AFTER the invalidation is confirmed to
avoid stop loss hunting.

I personally exit manually after invalidation is


confirmed to prevent SL hunting.
We will learn more about Stop hunting in the next
thread.

Conclusion.
1. Stop loss cannot be a fixed percentage as all trade
setups are different.
2. Stop Loss is nothing but an exit at an invalidation
level.
Reason for entry no longer valid = Stop Loss.
3. Use ONLY TA to find stop loss. Stop Loss =
Invalidation level.
4. Always have the Stop Loss determined before
entering a trade.
5. You don't have to post the SL order, you can exit
manually on invalidation to avoid false wicks aka
Stop hunting.

P.S. Don't be in a rush to move your SL to break-


even. This leads to your market participation
without any benefit. We will learn about this
concept Part 2 of Trading Bitcoin Master-Class.

Read the thread again, Practise it with Support/


Resistance and place SL at Invalidation.

Every setup needs it's unique SL. Read the charts,


adapt to different setups. Practice, Practice,
Practice.

Hope this helps. Share if you found it useful to help


other traders.
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