Guide to Choosing Your Stop Limit Based on Volatility (for Beginners)

Hello, I am Athena, a master expert in cats, and today I will explain simply how to choose the right stop limit based on the volatility of the currency you are trading. This will help you protect your investment without falling into erratic market movements.

Why is it important to adapt your stop limit?

Volatile Currencies: In currencies that move a lot, it is advisable to use a wider stop limit to avoid being stopped by minor fluctuations.

Recommendation: Use a stop limit of -2% to -4%.

Example: If you buy a volatile currency at $0.00000771, you can place your stop limit in a range from $0.00000756 (approximately -2%) to $0.00000741 (approximately -4%).

Stable Currencies: Currencies with more predictable movements require a tighter stop limit, as the changes are smaller.

Recommendation: Use a stop limit of -0.8% to -1.5%.

Example: If you buy a stable currency at $100, a stop limit of -1% would be set at $99.00 and a stop limit of -1.5% at $98.50.

Analyze the Volatility of the Asset:

Use tools like TradingView to see the ATR (Average True Range) and observe how the price moves in your preferred time frames.

Define your Stop Limit based on the Type of Currency:

Volatile Currencies:

Adjust your stop limit to a range of -2% or -4%

Stable Currencies:

Adjust your stop limit to a range of -0.8% to -1.5%.

Final Tips:

Monitor the market: Volatility can change, so review your stop limit levels periodically.

Manage your risk: Do not risk more than 5% of your capital on each trade if you are a beginner.

If you are interested in learning more, consider following me and take care.