Its better to show you based on charts examples so you understand.

Day Trading Strategies For Beginners

For example, you place sell trade on EURJPY and place your 20 pips stop loss as shown on the chart below:. Notice that this is a 4 hour chart of EURJPY and this currency pairs moves an average of pips in a 4hr timeframe?

So in this case, knowing this behavior the stop loss should have been placed at least 80 pips from the entry price instead of So when you do that, you will place your stop loss too close to the entry price level or at a price level that does not take into account technical analysisprice volatility etc. So instead of getting pips profit, you miss out when your stop loss was hit and price moved in the direction you anticipated after you are stopped out!

You are always going to calculate the percentage stop loss based on your trading account size that may be increasing or decreasing. Therefore, if you have losing trades, this decreases your trading account size therefore you percentage risk you calculate will be based on that decreasing trading account does the stock market game pay dividends and do you know what this issue is here?

Day trading stop loss percentage will take a lot longer for you to recover from losing trades that someone who trades with a fixed amount stop loss regardless of what size his etrade futures review account is.

If this does not make sense, lets look at this example of two trader, lets call them Trader Joe and Trader Blow. Trader Blow is the one that will recover very quickly compared to the trader Joe and therein lies the number 2 problem of trading with percentage stop loss.

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