The Stop Loss Strategy That Can 10X Your Profits

There are a few different ways to manage

positions and look after your trades

when you're already in them. One of them

is stop-loss trading, and that is what

we're going to talk about today. I'm

going to show you what stop-loss trading

is and how you can use it correctly to

create win-win scenarios in your

trading, which ultimately will help you

to increase your total profits. So,

let's get straight to it. So, what

exactly is stop-loss trailing then?

Well, when you get into a trade, you

should set a stop-loss order on every

trade. So, for this, this is our entry.

This is our target, and this is our

stop-loss. Now, your stop-loss is going

to get you out of a trade if a trade

goes bad. But the bonus of stop- losses

is once we place them, we don't have to

leave them exactly where they are. We

can actually move the stop-loss order

different ways to different prices. Now,

we should never extend a stop-loss

because if we get into a trade risking,

for example, $1,000 on this stop loss,

if we double the size of that stop loss,

we're actually now risking $2,000. So,

it's impossible to manage risk if you

extend your stop loss that way. But what

we can actually do is grab our stop-loss

order. So, let's say this is indicating

the stop-loss and we can pull it in to

the entry price, for example. Now, if we

pulled the stop loss to the entry price

and the market went up a little bit but

then reversed on us, rather than taking

a loss, if the market got down here, we

would actually be closed out of the

trade at this point, which means rather

than losing money, we would just be out

of the trade for break even. Okay? Which

means we do not take a loss and means

essentially we've won this position in a

sense that it didn't cost us money. Now,

we can also move our stop-loss into

profit. Obviously, we can't do this if

the market price is under where we would

like to put the stop- loss. But if a

trade starts to move in our favor, we

can actually utilize this ability to

move stop- losses by doing what we call

trailing. So, let's say this position

moves in our favor up to this point and

then we start to create some new

structure. What we could do in this

instance would be move our stop loss up

to follow the structure. So this way, if

the market pulls back, finds a new low,

and continues the trend, we can simply

trail again. But if the market is to

make a full-blown reversal and move all

the way down here, rather than getting

stopped out for a loss, which is not

good, or break even and missing out on

all of the profit potential we have in

this area, we would actually be stopped

out of our trade at this level here.

Now, if we think about what that would

do for us, well, our 5.5% potential

trade would be stopped out here at

1.8%. Of course, we didn't get the full

5.5% that we wanted, but we've still

taken a positive outcome on this trade.

Okay? Rather than making $0 or making

minus 1%, we've actually made plus 1.8

because we trailed the stop. So

stop-loss trading is simply utilizing

the fact that we can move stop-loss

orders and following price with our

stop-loss as the market moves up. If we

do this, we can actually minimize the

possibility of this trade turning into a

0% trade or a losing trade and we can

maximize the profits that a trade can

provide us because we can actually close

it as soon as it starts flipping on us.

Now, there is a right way and there is a

wrong way to trail your stop. If the

market is moving up in your favor, what

you shouldn't do is just run your stop

up immediately behind price. Okay? So,

let's say price moved from here to here.

You don't want to just follow it

directly with your stop because as we

know, markets rarely ever move perfectly

upwards or perfectly downwards. Most of

the time, if we look at smaller price

action or smaller charts, we're going to

have some movements like this going on,

right? which is of course likely to lead

us to being stopped out by market noise

on the way up towards the target. So

because markets are prone to moving up

and down and we could get movements like

this before the target is hit, it's

important that we're smart with our

trailing. The best way to trail stops to

avoid the problems we've just discussed

is to follow structure. Okay, so

structure refers to highs and lows in a

market. Now if we take a look at this

market example here, let's say we have

our stop loss in its initial position.

We can mark structure up from high and

low perspective. So this is our high.

Here we have a low. Here we have a lower

high. And here we have a lower low. We

have a lower high. And then we have the

low, the lowest point. Okay. So this

phase of price action based on structure

is bearish. That's a market that's

moving down. In this instance, we would

want to sell. The formation of the trade

that we got happened after we had a

break of structure here. So a break of

structure is simply a point of which the

structure breaks. The previous low,

previous high breaks and gives way to

new price action. So this would be our

break of structure on the downside as

would this and as would this where we're

seeing the market price breaking

consistently into new lows. Now I see

this here as a break of structure into a

new high. This is the start of an

uptrend. You might know this as a change

of character. For me, that's kind of

pointless terminology. I don't use it,

but that may be what you've heard of

that if you've traded price action

before, uh, and you're confused as to

why I call that a break of structure.

Now, the market at this point is

trending up. How do we know that? Here

we have a high, then we create a higher

low. So, this low is higher than the

previous one. Then we create a higher

high, a higher low, higher high, higher

low, and so on and so on. You get the

idea, right? So, what we're actually

doing is looking at the real highs and

lows inside of the price structure. And

this is how we're formulating ideas as

to which way the market's going. Now,

how is this relevant to stop-loss

trading? Well, that is because we are

going to follow the highs and lows in

price to actually decide where to put

our stop loss. With this initial move up

here, we're not going to do anything

with this stop at this point because

there's every possibility that after

pushing up, the market pulls back down

and then continues after making a new

high just above this previous one. So,

because of that, we don't really want to

move the stop based off of the first

price movement. Then we see this point

here, the market pulls back, creates a

new low, and then pushes up and creates

a new high. So this high here validates

the structure. Right? At this point we

have had a movement up a validated low

and a new validated high. The high and

the low is validated when we get the

break of structure. Our breakup

structure in this instance took place at

this level here. The point where this

high was broken by price creating this

new high which validates this higher

low. At this point, we could actually

trail the stop to under this structural

low here. The reason we can do that is

because if the market is then to reverse

and take out this low, we could be

seeing here a change in the trending

structure of the market. We've actually

then gone from a market phase of upward

higher highs and higher lows and we

would be shifting back into a new lower

low with a break of structure under the

current price action of the uptrend.

This is then likely to be followed by a

pullback and sell which would generally

lead us to losing or breaking even on

the position. So basically what we're

doing here is waiting for validation of

a trend in this format that we've just

discussed. Then we can follow price by

putting the stop loss under the recently

formed higher low. As you can see then

after creating this high the market

pulls back and creates a new higher low.

This higher low is not validated until

we create this high. When the market

creates a break of structure over the

previous high just here, the breaker

structure being here. This closure up

here validates the initial low. The low

being this one in this example. So at

this point, we could then safely trail

the stop loss from here under this

structural low to here under this

structural low because we know that the

higher highs and higher lows of the

market continuing up and up and up and

with the formation of this high, we've

validated the formation of this low and

the market shouldn't really move under

this low if it's continuing in its

uptrend. All right. Once again, then we

come down, we form a low here. This low

is validated when there is a break of

structure here creating this new high.

So we can actually pull the stop up to

this level and trail it under this low.

Now if the market had then created a

high, validated the high and we trailed

the stop and then decided to reverse on

us. So if we'd have had a movement down

like this, we'd be stopped out here

instead of all the way down back at our

entry or at our stop loss. This means we

would have created a profitable trade

here of 2.2%. 2% which obviously yes is

not the full percentage target we want

but it is still a lot better than the

trade going all the way back to zero or

to negative. So that's the idea behind

stop-loss trading. Structure is the one

big thing we want to look at. And now

let's go over to a chart and I'll show

you how this looks in action. All right.

So in this example we are going to look

at a trade on GBP AUD which is a selling

opportunity. So it works the exact same

way for sells except you are going to

trail your stop loss over highs as the

market structure breaks down. The

position is just now executed. Our

initial stop-loss order to get us out of

a trade in a loss scenario is above this

high. For now we don't want to move it.

We need to see some structure form

before we can actually consider moving

our stop loss. So we can look at the

recently printed low. We need to

remember though that until we close

underneath this level, there is no

validation of this low. Okay, the market

could realistically move higher. So, we

don't want to trail stopped until the

market's pushed under this low, allowing

the market to play forwards. We see we

get a nice downward move initially. At

this point, still no trailing would take

place. Now, one very important thing

about this trailing system is that you

need to stay time frame relative. That

means for example in this position we

executed here on the 30 minute time

frame. We don't really want to go lower

than the 30 minute to determine the

structure because as we discussed before

there is noise on lower time frames. If

we execute on the 30 minute and then we

go to the five minute, there is going to

be trends inside of trends taking place

right here where I've just drawn this

line. Which means we may be drawn in

induced to actually move our stop-loss

into profit or trail it at least behind

price based on 5minute price action when

realistically the market could chop back

and hit those stops. Okay? such as just

down here. We created this low, we

pulled back, and then we've pushed back

up. If we'd have trailed our stop loss

based on low time frame structure, we

might be out of this trade, even though

it still has all the room to move lower.

So, now that we've validated and closed

beneath this low, we can take the first

step to trailing our stop. And that's

going to be nice and simple. We are just

going to pull it to the entry level.

Okay, this is now what we call stop-loss

to break even. That would essentially

pull the stop loss all the way to the

entry point, meaning if the market

reverses on us, we will not take a loss.

We will be out for $0 profit, $0 loss.

Okay, I'm going to leave this to

visualize the riskreward, but we've

pulled the actual simulated trade

stop-loss down to the entry point. Now,

we are in a win or no loss scenario. We

can also go ahead at the moment and

start to look at the low that's just

been printed because if the market was

to pull up and validate a high by coming

back down and breaking through this low

that would give us what we need to

actually trail the stop down to this

point for example. So let's run it

forward and see what the market gets up

to here. Once again keeping it relevant

to the time frames. So we're going to be

working with the 30inut. Okay. So, as of

right now, basically, as we understand,

providing the market stays under this

high, it is still in a valid downtrend,

and we can happily hold the stop where

it is without worrying too much about

getting stopped out. And if we do get

stopped out, it's generally going to be

because the market is pushing up and

breaking structure, which would

invalidate our position. And at that

point, we'd rather be out risk-free.

Okay, so we're seeing the market pulling

down. And here, we've created a candle

closure. Our first break of structure

was here, which allowed us to trail the

stop to even. Our second break of

structure has just taken place here,

which would allow us to trail our stop

down under the next structural point.

That, for me, is going to be this wick

area. I'm going to pull this over so it

stops being annoying. We could pull the

stop to just above this level. It's not

too much further, but it gives us at

least a small win in the worst case

scenario if the market was to flip

against us. Now we would like to see for

continuation of this trend a new high

followed by a new low to validate the

high and then we could follow the market

down with our stop. So let's see if that

happens. We basically just want to see

continued downside. Generally I look at

structure as waves. This is something

interesting as well as to not get caught

up in every tiny little move that takes

place. Try to visualize structure as

larger waves. So average it out. That's

wave 1. That's wave two. That's wave

three. That's wave four. This is wave

five. We generally want to see some form

of meaningful retracement in order to

validate this wave of structure and give

us what we want to go lower. Okay. So

that's the idea of just averaging out

the waves of structure so that you can,

you know, see them for the full picture.

So now that the market's flattened out

quite a lot, I'd be interested in seeing

this structural low break. We could

validate this as a previous structural

high if we were to get some solid

closures. So there we have a closure. We

could go ahead and trail the stop loss

down quite aggressively behind price. So

now we'd see this as our next structure

wave. This is the following one from

there. This is where we're actually

starting to turn this trade into quite a

large one. In the worst case scenario

now we're probably going to get around

2%. Yeah, about 2% if the trade hits

stop. But if it continues with the

downward trend, we obviously have

potential to take this into the full

target. So allowing this to run forward

a little bit more. We see the market

come up. We are looking for a new low.

There's our new low. So let's just run

through price. Remove these off just to

keep it neat. We have the first break of

structure that we covered which is going

to be this one here. So we created a low

and we broke it which allowed us to

bring our stop to here. Then here we

created a new low. We broke it here

which allowed us to bring our stop down

to this point. Then we created this high

followed by this low which allowed us to

bring our stop to where it currently is.

And now once again we have created a new

breakin structure. So neaten that one

up. We've now pushed through this

30-inut low with a nice candle closure.

So we can bring our stop down to above

this high. We're now probably looking

close to 2.5 to 3% return in a worst

case scenario. And of course we can keep

running this towards the large target.

Let's run it forward a little bit more

with our trail stop. We are hoping that

the market will create a new validated

low lower than the previous one so we

don't get stopped out to keep that trend

intact. Okay, so ideally from here we

would see the market start to flip down.

We would need to see closures just like

that to validate the next low. Okay, now

this isn't always going to be so smooth

and this is why trading is a viable

thing to do and a very valuable thing to

do at that. In this instance, we have

had a reasonably nice trending market,

but markets aren't always going to go

the way you want them to. This one could

still flip on us rather aggressively and

that will sometimes happen. That is the

whole reason that we do this trading

method because if the market decides to

make a sharp reversal against us, at

least we are taking a good profit rather

than getting stopped out for zero. So,

what we can do now is put our stop loss

above this high and then providing the

market doesn't make a new high and

continues with the trending structure,

we should be just fine. Now, there's

also another method of trailing that we

can discuss in just one moment around

here. Sometimes you're going to be

getting very close to your target. So,

our total target for this simulated

trade is

7.7%. We're now at 6.3%.

This means we have dynamic riskreward to

consider. If the market gets all the way

back up here, we'll be closing this

trade for

2.6%. That means we're going to be

risking close to 4%. Okay,

3.7%ish just to hold this trade out for

around 1% more profit. So, we have a

dynamic riskreward problem where we're

basically going to be risking 3% to make

one. Now this is the only point of which

if you wanted to at this point we could

accept look this is a very big trade

we've closed 6.4%. We can start to work

with aggressive trading. So remember at

the start of the video I said generally

we don't want to just chase price down

with the stop. It's a point like this

where the dynamic riskreward is worth

considering that you may want to do

that. Now there is also nothing wrong

with leaving your stop loss where it is

here. You could leave this and just let

it run. Hopefully, it hits the target

and if it flips on you, then you're

still going to be taken out for around

2.6%. But if you are a bit more of a

riskaverse trader and you are seeing

that look, we've got a 6.3% return here.

I would rather lock in as much of this

as possible, you could do aggressive

trading, which is essentially where you

follow the individual candles down. So,

if we moved our stop loss to this level,

for example, that would mean worst case

on this trade now is going to be a 5.9%

return or pretty much a 6% return. You

could also, if you wanted to give it a

bit more leeway, put it above the

previous structural high. So, this would

be our standard position to put it in.

That's going to lock in a 4.6. Or if you

wanted to trail aggressively, you could

really follow price down and basically

on the formation of every new candle,

you would essentially then just follow

price through the range. Okay. Now, in

this instance, because of the

difference, this is already a 4.6

position. I would say just trading over

the previous structural high. It's

probably going to be the best move here.

And if we get a closure down here, then

I'm going to get seriously aggressive

with trailing the price. But providing

the market stays under this high, we

should be okay. And because we've now

managed to extend the profit potential

of this trade out to a minimum of 4.6,

I'd be happy to give this little bit of

leeway. If we miss out on this 1 and

a.5% return, that's fine. We're still

closing in 4.6. And if we run straight

down, perfect. We can aggressively trail

behind price and bring things down to

the takerit. Okay, so let's see how the

market goes. We see a small high being

created. Ideally, we would see a push

down and closure under the low. that

would then validate new lows and we

could get really aggressive with the

stop trailing. Now, in this instance, of

course, if the market reverses on us, we

are not hurt here. We've taken 4.6% from

a trade. So, we're happy either way. Of

course, the ideal scenario would be the

rundown, but we will just see which way

this goes from here. So, now that we've

started to push down, realistically, we

would then ideally want to start

aggressively trading. This is a weekend

gap. So this is just an anomaly.

Sometimes that's going to happen where

you get gaps up. For this trade, we have

then been taken out for a 4.6% return.

Realistically, we wouldn't be holding

this trade over the weekend this close

to the target. So it's more likely you'd

have taken around 5.5% by closing it

before the weekend started. But in a

simulation setting, of course, it's easy

to miss these little things. So let's

take a look at this trade. Then pull

this all the way across. We were stopped

out just here. This creates a 4.63%

return for us. If we take a look at the

profits on a $100,000 account, this is a

$14,681 balance. So that's a

$4,681 profit on that position. Now, if

the market was to reverse all the way on

us at any point throughout this journey,

we've basically built a scenario for

ourselves where we are getting out for a

win. Okay? By the time we got to here,

we were already break even. So just this

first push removed all risk from the

trade. By the time we got to here, we

had a minimum of around half percent

profit locked in. By the time we created

this high, we were going to be looking

at around 2% profit at a bare minimum.

And we've actually managed to follow

this all the way down successfully. But

had the market flipped on us at any

point, we'd have been out for a winning

position. So we've created a scenario

where it is purely winwin. Now we've

been stopped out down here due to a

market gap. Your more realistic close

for a position is going to be around

there, end of week, close the trade up

and let it go, which would be 5.87, but

even 4.6 is definitely something to be

rather happy with as well. And that's a

solid explanation of stop-loss trading,

which is an excellent way to minimize

losses and maximize returns from your

trades. Stop-loss trading helps to

minimize the risk of losing, helps to

lock in profits and creates win-win

scenarios, which is quite a rare thing

to get in trading. The simple process to

follow that I've outlined for you in

this video is once you've entered and

your stop loss is under a low or above a

high, you would then wait for validation

of a new high to form within the

existing trend, which requires a break

of structure. That low being validated

by the creation of a new high will then

allow you to move your stop loss up to

follow the structure. And again, the

formation of a new high will validate

the low and then you can move your stop

loss up to follow the structure. And the

cycle repeats like this until your

target is hit or the market reverses on

you, but you still get out with a nice

win. Now, if you want to build this into

a trading system, I have a free course

that you can enroll in right now. It's

going to take you through the process of

building trading systems, simplifying

your trading, improving the trades that

you take, and ultimately it's going to

help you to find success. So, if you

want to sign up to that, there is a link

at the top of the video description. And

if you don't want to do that, check out

this video next, which goes deeper into

the concepts of market structure and

trading with the trend. Thank you for

watching. I see you in the next