How Many Indices Trading Pips Should I Set My Stop Loss Indices Order?

How to choose you stop loss level the target stop loss should be based on various strategies depending on your type of indices trading method.

The 3 techniques of selecting stop-loss levels are:

Strategies & Methods of Setting Stop Loss Indices Orders in Stock Indices Trading

Traders using a indices trading system must have mathematical calculations that reveal where the order must be placed.

A trader can also place a stop-loss order according to the indicators used to set these orders. Certain technical indicators use mathematical equations to calculate where the stop loss stock indices order should be set so as to provide an optimal exit point. These trading indicators can be used as the basis for setting these orders.

Traders also place these orders according to a predetermined risk to reward ratio. This method of setting is dependent upon certain math equations. For examples a ratio of 50 pips stop-loss can be used by a trader if the trade has potential to make 100 pips in profit: this is a risk:reward ratio of 2:1

Other traders just use a predetermined percent of their total indices trading account balance.

To set a stop loss it is best to use one of the following methods:

1. Percent of Indices trading account balance

This stop-loss setting method is based on percent of account balance that the trader is willing to risk.

If a trader is willing to risk 2% of account balance then the trader decides how far he will set the stop loss order level based on the trade size which he has bought or sold.

Example:

If a trader has a $10,000 account & is willing to risk 2%

• If the trader buys 1 mini contract

  1 pip = $1

  Then setting at 2 %

  2% is $ 200

2. Setting Stop Loss Stock Indices Orders using Support and Resistance Areas

Another way of setting indices stop loss stock indices orders is to use supports and resistance levels, on the stock indices charts.

Given that stop-loss orders tend to congregate at key points, when one of these levels is touched by the indices trading price, other stock indices orders are set off. Stop loss orders tend to accumulate just above or below the resistance or support levels, respectively.

A resistance or a support area should act like a barrier for the stock indices trading price movement, this is why they are used to set stop losses, if this barrier is broken the stock indices trading price movement can go toward the opposite direction of the original indices trade, but if this barriers (support & resistance levels) are not broken the stock indices trading price will continue heading in intended direction.

Stop Loss Indices Order Level Setting using Resistance Level

Setting stop-loss order above resistance level

Stop Loss Indices Order Level using Support Level

Setting stop loss order below the Support Level

3. Indices Trend Lines

A indices trendline can be used to set stop losses where the stop-loss stock indices order is set just below the trend line. As long as the trend line holds the trader will be able to continue making profits while at the same time set this stop-loss stock indices order which will lock his profit once the trend line is broken.

Setting stop-loss order below trendline

Examples of where to set this stop loss order using indices trend lines.