Indicators For Setting Stop losses In Stocks

Some indicators are used for setting stop losses taking away the need for traders to perform complex calculations on where to place these stop loss orders.

A trading systems trader can also place a stop loss order according to these indicators. Some indicators use mathematical equations to calculate where the order stop loss order should be set so as to provide an optimal exit. These indicators can be used as the basis for setting stop loss orders. These indicators follow price action of a instrument closely and define the boundaries which the prices should move along in. When the price moves outside these boundaries it is therefore best to close the open trades because price stops moving in that particular direction.

Some of the Technical indicators that can be used to set stop loss orders are:

Parabolic SAR Technical Indicator

Parabolic SAR is like an Automatic Stop Loss Order and TP Order Indicator used to set a trailing price stop loss

Parabolic SAR provides excellent exit points.

In an upwards trend, you should close long trades when the price falls below the Parabolic SAR indicator

In a downwards trend, you should close short trades when the price rises above the Parabolic SAR.

If you are long then the price is above the parabolic SAR, the SAR will move up every day, regardless of the direction in which the price is moving. Amount the Parabolic SAR indicator moves up depends on the amount that prices moves.

Parabolic SAR - Indicator - Automatic Stop Loss Order and TP Order Indicator

Picture of parabolic SAR & how it is used

Bollinger Bands Indicator

Bollinger bands indicator use standard deviations as a measure of volatility. Since standard deviations indicator is a measure of volatility, the Bollinger bands are self-adjusting meaning they widen during periods of higher volatility and contract during periods of lower volatility.

Bollinger Bands indicator consist of 3 bands designed to encompass the majority of a instruments price action. The middle band is a basis for the intermediate term trend, mostly it is a 20 day period simple moving average, which also serves as the base for calculating the upper band & lower band. The upper band's & the lower band's distance from the middle-band is determined by the price volatility.

Since these Bollinger bands are used to encompass the price action, the bands can be used by traders to set stop losses just around the area outside of these bands.

Bollinger Band Setting Stop Loss Order Level - Bollinger Bands Technical indicator

Stock Fibonacci Retracement Levels Indicator

Fibo retracement areas provide areas of support & resistance, these areas can be used to set stop loss levels.

Stock Fibonacci Retracement level 61.8 % is the most commonly used level for setting stop losses. A stoploss order should be set just below 61.8 % fib retracement level

The 61.80% Fibo retracement level indicator is used to set these orders since its rarely hit.

Fibonacci Indicator StopLoss Order Setting at 61.8% Retracement Level

Fibonacci retracement level 61.8% - Fibonacci Indicator

Support & Resistance Levels Lines

Support and resistance levels can be used to set stop loss levels where the stop losses are set just above or below the support or resistance.

• Buy Trade - Stop Loss Order set few pips below the support

Buy Trade - Stop Loss Order set few pips below the support

• Sell Trade - Stop Loss Order set a few pips above the resistance

Sell Trade - Stop Loss Order set a few pips above the resistance