Sold SingPost (S08.SI) at 1.28 to Close Position

Close position for a loss of 1R. Notice the MACD crossover on the second section of the chart below. It so happens that the stop levels I picked also tend to be of technical significance. I basically pick my stop levels just below support or resistance levels.These levels once breached usually sees further unfavourable price action beyond.

Stop levels also determines your loss per share which when paired with R (what you are willing to lose per trade) in turn determines your position size. Which in turn determines your profit if the price action is favourable. These are important parameters to any successful trader.

When successful traders talk about their reward: risk ratio for any trade, they are mindful of these parameters and their relationship to each other. They also look for a good entry and a stop level that gives them a good reward: risk ratio.

If it sounds complicated, it really is not. They are natural relationships that define any trade and are familiar to traders with proper risk management practices. Much like the accelerator, brake, steering wheel, handbrake, clutch, gearbox, rear-view mirrors form a natural relationship to each other for the driver to control their cars.