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is there any guide available to analyze stop loss and take profit? how do we analyse the graph correctly based on the testing done
You can’t predict the future.
The list of unforeseen market moving catalysts is infinite and when they happen, they can rock the markets and your forex trading system.
Understand that this is part of trading and the best you can do is be prepared to limit your losses if they occur.
Be ready to have your world rocked. And we don’t mean that in the way you think it means.
Data doesn’t move the market. Humans do.
I Wish You Happy Trading
Why Guessing Stop Losses and Take Profits is a Plan for Failure
A trading position will normally exit at one of two points. After entering the trade, either:
The price reaches the take profit (TP), and the trade finishes in profit
The price reaches the stop loss (SL), and the trade winds up with a loss
When deciding trade exits, it is sometimes tempting to make an educated guess. Some traders use technical features such as chart candles, trends, resistances and supports. Others simply choose a fixed ratio of profit target to stop loss.
While this is very common, there are several drawbacks:
It is error prone. When you guess the exit levels for a trade it is very easy to either overestimate or underestimate price movements.
It is not repeatable and that makes it very difficult to analyze or improve performance. When there is no logic or methodology behind placements of exit points, you never know if a failure was due to a miscalculated TP/SL combination or because your strategy is not working.
Traders will often move stops up or down on subsequent trades based on trial and error trying to find a “sweet spot”.
It is very difficult to automate methods that rely on gut instinct or other subjective decisions.
There is nothing wrong with using technical analysis as a guide for timing the trade entry, nor for judging how far the price might move.
My advice you must a pre defined reasons for setting your SL and TP.
I Wish You Happy Trading
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