One of the most import lessons learned in becoming a trader is never trade without a stop loss set. For those who are not familiar, well you should not be trading, but a stop loss is the last line of defense set up to protect you if the market goes the opposite way of your trade. Although the concept of a stop loss is quite simple, where to place it can be an entirely different stories. It is best that you have a specific set of rules that tell you how to measure your stop loss, but it isn't always that simple.

Yesterday I caught a trade that wasn't on my radar. I was skimming through charts before I went to bed (like the market nerd I am) and i noticed a set up that was very appealing. It was an AB=CD pattern on the CADJPY that seemed to be fighting back and fourth at a structure area. I usually don't like taking a trade that I haven't fully analyzed as i've ran into trouble in the past for doing so, but I figured with the risk reward ratio being in my favor so much it was worth jumping in. The price action continued to fight the upper resistance for a few candles before finally rolling over and breaking through the lower support level. At this point I figured that the market has made it's decision on where it wanted to go and I decided to move my stops down directly above the highs. After all my main objective isn't to gain a lot of money really fast. Its to protect myself as much as possible and limit my losses.  Needless to say when I woke up I was stopped out of the trade for a small loss. Then the market decided to roll over and hit what would have been my profit targets. 

I'm at the point where I brush losses right off now because they're not worth stressing over. However, when I reviewed my trade I noticed that if I would have kept my stop loss in its original position, it wouldn't have been hit. Now, I don't regret what I did because it's in my rule book, but it reminded me of when I was a rookie trader and I often was so scared of taking a loss that I would set my stops so close to price action that the market would always take me out on its way to becoming profitable. This is where you have to ask yourself. Stop losses are for your own protection, but if you're scared to a point that you continue to set them too close because of that fear then you're really just preventing yourself from being successful.  

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