How to set a stop loss based on the support and resistance of the chart

A wiser way to set a stop loss is to rely on the information provided in the technical chart.

Since we are trading in the market, perhaps we can base our stop loss setting on market performance... It makes sense, doesn't it?

What we can observe in price behavior is that prices cannot break through a certain level.

Usually, when these support or resistance levels are tested again, they have the potential to control the market and prevent it from breaking through again.

Setting a stop loss beyond these levels of support and resistance is feasible. Because if the market trades beyond these areas, there is reason to believe that breaking through this area will attract more traders to join the trading, further deviating your position from your expectations.

It is also possible that these levels have been disrupted, and some forces that you are not aware of suddenly force the market to move in this or that direction.

Let's take a brief look at the method of setting stop loss based on support and resistance:

From the above chart, we can see that the currency pair is trading offline with a downward trend.

Do you think this is a good opportunity to break through the trading setting. You have decided to go long.

Before entering the transaction, ask yourself the following questions:

Where can you set your stop loss?

What kind of situation will tell you that your original trading idea is not feasible?

In this example, it is most reasonable to set the stop loss below the support area of the trend line.

If the market enters this area, it means that the trend line does not support buyers, and currently the seller controls the market.

Your trading plan is invalid, it's time to close, leave the trading, and accept the reality of damage.

for example:euro/dollar

In the chart below, the Euro/The US dollar has been declining. The price has reached the downward trend line several times, which creates a good resistance level.

You can check the downward trend line(1.3690)Place a short order.

Now, where do you want to put your stop loss point?

Your stop loss will be on1.3800At.

Note how this is above the resistance zone:Downtrend line.

Let's set a profit target as1.3530and1.3450。

Transaction triggered. The trend line represents resistance and price decline.

Your first profit target has been hit. The second profit target is a singlepipI missed it, but at that time, you had already transferred your stop loss to break even(Your entry time is very short)So you haven't lost anything.

This is a guide that uses resistance as a guide to where to place your stop, rather than simply using a fixed number.