I recently had a High Probability Trading Strategies book reader and DT Forex Report Subscriber inquire about stop loss placement on a potential trade setup we noted in a recent report. His question was regarding a potential trade setup in the report and the potential initial capital exposure. The initial stop loss would have been too far away from the entry to limit the initial capital exposure for his trade plan.
Firstly, our DT Daily Forex Report uses 60m data to identify intermediate term swing trade setups. We only make general trade strategies, not specific trade recommendations because the report is just issued once a day. Readers that apply the trade strategies taught in the book can usually identify setups with much lower initial capital exposure when the trade execution conditions are made.
But, the real lesson here is what if an ideal setup is made, but the objective entry and initial stop loss will result in more capital exposure than allowed by your trading plan as described in the book? Perhaps the lower time frame momentum did not make a reversal until the market had moved a considerable length away from where the stop is to be placed.