The intra day forex market is full of noise that it becomes difficult for new traders to understand where to put the stop loss. There is so much noise in the forex markets in the short run that prices tend to jump 10-20 pips for no apparent reason.

This becomes frustrating for many new day traders. Most constantly find their stop losses being tripped due to noise even when the rates are going in the anticipated direction.

A static 10-20 pip stop loss is an arbitrary choice many traders make. Many new traders also use Trailing Stop Loss. Place your trailing stop loss too close and you will find your stop hit too early. Place it too far and you will have to forgo potential profits if the price retraces.

Many professional forex traders do use stop loss but mostly place it on their computers hiding them from their brokers. Best way to place a stop loss is using a dynamic level.

Because if brokers find many stop losses at a particular price level they can easily trip them using a momentary blip in their price feeds. You cant do anything. It was a momentary spike during to a sudden large transaction in the market. This is known as Stop Hunting.

More often than not, professional traders, trade with a stop loss at all, only keeping a mental stop loss. But you will need a lot of experience to trade this way.

Dynamic stop losses can be easily placed using Moving Averages, Bollinger Bands, SARs etc. Using a dynamic stop loss is a good way to manage your risk while letting the currency markets do what it wants.

With more experience, you will learn that placing fixed stop losses actually harms more. Rather than helping, using a fixed stop loss can hurt you more emotionally, psychologically and profit wise.

Never ever trade, just before a major economic news release. Dont place your stop loss close to or at round numbers and at times of thin liquidity in the markets.

You should understand that your broker can and will use stop hunting to take out your positions using noise in the market as an excuse. Forex trading and casinos have many things in common. You should learn how to beat the markets and the brokers only then you will become a successful forex trader.

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