As you may know, a stoploss is a pending order in the direction opposite your trade. For
example, if you buy GBPUSD at 1.9800, you might place a sell stop order at 1.9750. That
way, if price heads south, your maximum loss will be limited to 50 pips. Basically, once the
price hits your stoploss, you’re automatically exited out of the trade. Stoplosses are crucial in
order to avoid unnecessary large losses. That’s why every successful trader uses them
religiously.
There are two ways you can set your stoploss in the London Forex Rush system, depending
on your personal aversion to risk: an aggressive way and a conservative way.
1. Aggressive stop loss placement: the stoploss is placed 5 pips behind the Tokyo
range mid-band. That is, you take the Tokyo range’s high, subtract its low, divide the
result by two, and set your stoploss 5 pips behind that figure.
2. Conservative stop loss placement: to take a more conservative approach, you can
place your stoploss 5 pips behind the opposite Tokyo band from the breakout band. For
example: if you buy the breakout of the Tokyo high, place your stoploss 5 pips below
the Tokyo low.
So which is better? There’s no right or wrong answer to that question. It depends entirely on
how much risk you’re willing to take as a trader.
We personally use the aggressive stoploss positioning. My reasoning goes like this: the London
Forex Rush is a momentum-based technique. When the breakout we’re looking for comes,
we want the price to be moving away from the Tokyo trading range rather quickly.
If, once it breaks out and we have entered a trade, price comes back within the Tokyo range
again, it may well mean that we were lacking the momentum we thought we had in the first
place. Without that momentum, I don’t feel the need to wait for the price to reach the opposite
band of the Tokyo range in order to exit the trade.
In essence, I feel momentum is important enough an ingredient for our success that in its
absence, seeing price returning to a level midway through the Tokyo band (plus 5 pips) is
more than enough to get me to drop the position.
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