SL Orders based on a Fixed Percentage

In this approach, you define your stop loss order based on your maximum acceptable loss.

For instance, one trader has a $50,000 trading account, she decides to risk 1% of the account on any given trade. If she decides to trade the EUR/USD she will have to set the stop loss order 50 pips away from the entry price, this way she is risking $500 per trade. This percentage can be changed depending on the risk appetite of each trader.

One important drawback of this methodology is that it completely ignores important technical levels such as support and resistance, HOPS, LOPS, PP, etc. However, some traders use this as an advantage since most of the time the stops aren’t placed at populated or logical levels (where traders behave illogically and emotionally).

We at StraightForex do not recommend this approach to our students as it is subjective and we feel by using objective methods to select a SL position it uses our market knowledge to fuller effect