3 Rules of Setting Stop Losses
Rule #1: Don’t let emotions be the reason you move your stop.
Like your initial stop loss, your stop adjustments should be predetermined before you put your trade on. Don’t let panic get in the way!
Rule #2: Do trail your stop.
Trailing your stop means moving it in the direction of a winning trade. This locks in profits and manages your risk if you add more units to your open position.
Rule #3: Don’t widen your stop.
Increasing your stop only increases your risk and the amount you will lose. If the market hits your planned stop then your trade is done. Take the hit and move on to the next opportunity.
Widening your stop is basically like not having a stop at all and it doesn’t make any sense to do it! Never widen your stop!
These rules are pretty easy to understand and should be followed religiously especially rule number 3!