Thread by @ProdigalTrader

Volatility based Stoploss in day trading
Why closing based SL is fraud idea?

when u day trade with chart analysis,
u need to use OHLC charts
That means u use bar charts or candlestick charts.
U should never use line chart for that

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This is quite obvious and everyone knows that
But the question is why is that?

Pls read on

In OHLC charting,
High and Low of every candle denotes the volatility in that time period.
This parameter is of atmost important in day trading as

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this determines the stoploss for the trade
If a trader measure the volatility of every bar properly,
he is well informed about how much price can swing
away from a certain price point at any given period of time.

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He just needs to keep his stoploss
just a few points away from that max volatility limit.
If u use line chart,
there is no way to assess the volatility in the price
and
u are literally running blind with zero idea about the volatility in the market.

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Another important point to add here is that
to fix the Sl in LTF trades,
volatility is the main parameter,
not the signal candle high/low or swing bigh/ swing low.
Often newbies place SL just below the recent swing low,

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or below day low or even below the low of the signal candle for a long trade.
This is a dangerous method as far as the risk management methods are concerned.
Without knowing volatility in the price, how would one know that this SL is safe?

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anytime a swing would come to takeout ur SL.

This is the reason why
u should always use candle stick charting which give a multi-dimentional view of what price is doing.

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Now, having read all this
how do u feel about
the trading recommendations u see in twitter with daily closing basis, or weekly closing basis SL??

Each and every one of them posts a candlestick chart
which means that he showed
how valatile the price is in that time frame.

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And yet came up with closng basis SL.
He himself showed he had studied voaltility in the market as he showed the OHLC chart.
And suddenly came up with the idea of ditching his own analysis
and
skill as a chartist
to preach about a "closing basis SL"

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Its easy to find who knows and who 'pretends to know' from what they speak in public.
Its ur responsibility to find out the 'wolf in sheep's clothing'

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