3 Tactics To Avoid Getting Stopped Out By Spikes

1. Avoid Trading Before Important Speeches

Avoid Getting Stopped Out - Yellen Speech

From my trading journal. Got stopped out at the beginning of Janet Yellen's speech

The first thing I think of when hearing about spikes in Forex are those speeches that cause unpredictable reactions in the market.

I have been stopped out so frequently toward the beginning of a speech that I decided not to enter any trade on the day a major-importance speech was scheduled. Many times, I would see the price go in the direction I expected but ended up being stopped out because of the initial reaction (i.e. a spike).

2. Use An ATR-Based Stop Loss

While most Forex traders base their stop losses on candlesticks, a more prudent way to cut your losses might be to use an Average True Range (ATR) based stop loss.

The ATR represents the average range of price for a particular period. For instance, a 14-day ATR of 0.0168 would signify that price moved on average 168 pips per day (the range) over the last 14 days.

Typically, if your stop loss can't tolerate the value of the ATR for a period, you're most likely placing your stop loss too tight.

In a very volatile market, the ATR would increase and this might mean that you'll need to reduce your position size in order to take the trade with the same risk percentage.

3. Have A Re-Entry Strategy For The Trades You Miss

As the last tactic, a re-entry strategy to get back in the market can be very useful when you miss a trade or get stopped out for whatever reason.

A re-entry strategy often allows you to take a trade that's the same or higher-probability than the initial trade. That is often going to be a trend following type of trade.

You can either use a slightly different trade setup and add it to your trading strategy playbook or you can use the same trade setup and wait for that trade opportunity to appear again.

What are you doing to avoid getting stopped out in the Forex market? Do you simply accept the losing trades? Comment below and let's keep the ideas flow!

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