How Many Commodity Trading Pips Should I Set My Stop Loss Commodity Trading Order?

How to select you stop loss level the target stop loss should be based on various strategies depending on your type of commodity trading method.

The three techniques of choosing stop-loss levels are:

Strategies and Techniques of Setting Stop Loss Commodities Trading Orders In Commodity Trading

Traders using a Commodities system must have mathematical calculations that reveal where the order must be placed.

A trader can also place a stop-loss order according to the technical indicators used to set these orders. Certain indicators use mathematical equations to calculate where the stop-loss order should be set so that to provide an optimal exit point. These technical indicators can be used as the basis for setting these orders.

Traders also place these orders according to a predetermined risk to reward ratio. This method of setting is dependent upon certain mathematical equations. For example a ratio of 50 pips stop loss can be used by a trader if the trade has potential to make 100 pips in profit: this is a risk : reward ratio of 2:1

Other traders just use a predetermined percentage of their total commodity trading account balance.

To set a stop-loss it's best to use one of the following techniques:

1. Percent of Commodity trading account balance

This stop-loss setting method is based on the percent of account balance that the trader is willing to risk.

If a trader is willing to risk 2% of account balance then the trader determines how far he will set the stop loss order level based on the trade position size that he has bought or sold.

Example:

If a trader has a $10,000 commodities trading account & is willing to risk 2 %

• If the trader buys 1 mini contract

  1 pip = $1

  Then setting at 2%

  2% is $ 200

2. Setting Stop Loss Commodities Trading Orders using Support & Resistance Levels

Another way of setting stop loss orders is to use supports and resistance levels, on the commodity charts.

Given that stop-loss orders tend to congregate at key points, when one of these levels is touched by the commodity price, other commodity orders are set off. Stop loss orders tend to accumulate just above or below the resistance or support levels, respectively.

A resistance or a support level should act like a barrier for the commodity price movement, this is why they are used to set stop-losses, if this barrier is broken the commodity price movement can go towards the opposite direction of the original commodity trade, but if this barriers (support & resistance levels) are not broken the commodity price will continue heading in the intended direction.

Stop Loss Commodity Order Level Setting using Resistance Level

Setting stop-loss order above the resistance level

Stop Loss Commodity Order Level using Support Level

Setting stop-loss order below the Support Level

3. Commodity Trading Trend Lines

A Commodity Trading trend-line can be used to set stop-losses where the stop loss order is set just below the trend line. As long as the trend line holds the trader will be able to continue making profits while & at the same time set this stop-loss order which will lock his profit once the trendline is broken.

Setting stop loss order below trend line

Example of where to set this stop-loss order using Commodity trend-lines.