Okay, so in this section it's all about exits and when it comes when it comes to your exits, there are two parts to it. First part is this: where do you exit if you're wrong? This is also known as your stop loss number two where to exit. If you're right, this is also known as your take profit. So let's study stop-loss first right: where do you set a proper stop-loss right when you're trading, so you don't get stopped out too early? So when it comes to stop-loss, i only have one technique.

There's one technique where it serves my trading right to to set a proper stop loss, so the one technique that i want to share with you is based on this concept. You should place your stop-loss at the level which invalidates your trading setup. I know that sounds a mouthful, so let me explain so let me, let me ask you right. If you look at a let's say a trending market market is in an uptrend.

Let me ask you at which point right. Would you say that you know this? Uptrend is invalidated, or this uptrend is destroyed. Will it be at here? Let's call it point a here point b or here point c, a b or c take three seconds. One, two three! Well, if you ask me okay, i would say the level that this trend will get invalidated is at point c, because if you think about this, if the market retraces down to point c all the way down here, then clearly, this uptrend isn't looking like how an Uptrend should be, which is a series of higher highs and higher low, so your stop-loss should be at c right, which invalidates this uptrend.

Now, why not a or b? Because, if you think about this, if the market retraced to a continue higher, this still looks like an uptrend. If he traces to b goes up higher, this uptrend is still pretty much intact. So your stop loss right. The key thing that i'm trying to bring across is that it should be at a level which invalidates or destroy your trading setup.

So if your trading setup is a trend trading setup, your stop-loss should be at a level right where your uptrend looks funny. It doesn't quite look like an uptrend anymore. So another example - let's say you are trading support resistance market is in range, goes up down up down up down. Then this is the lows of the range this is otherwise known as support bounce once twice three and here fourth time.

So let me ask you and which, let's say you're long over here at this price point: where do you put your stop-loss well using this concept right, your stop. Loss should be placed at a level which invalidates your trading setup, so at which point on this chart will support, be broken. Is it over here a let's call this a b or c and again it's i'm sure. You agree right, it's a no-brainer.

It will be c because if the price hits down lower, it hits at point c. This area of support is slightly broken if it reaches a or b. Support could still be intact because you know the support is an area on your chart and it didn't even breach the lows of support for a and b right, but for ces you know exit it exited it by a decent margin and there's a good chance that You know, support is broken and your trading setup is invalidated and that's what i mean by you know invalidation. So now now here comes the so-called quantitative part of it.

How do you know make sure that your stop-loss right is set the proper way consistently each and every time? Because i mean, if you look at the chart, you can eyeball right this level that level. But if you do that, you know over the next 500. 000 trades: you can see that your subjectivity might creep in right and you know cause you to not set your stop loss properly in a consistent manner for the long run. So the way to do it right is that you want to use the concept of the atr, which stands for average.

True range, you want to set your stop loss, one atr beyond the area of value. So before i talk about this technique right, let me share with you what atr stands for, so atr stands for average. True range right, so average range. So let me give you a quick crash course on this indicator, so this indicator is a volatility base indicator.

So when volatility is high, the value of this indicator will be high. If volatility of the market is low, the value of this indicator will be low. So for those of you who don't know what volatility is, in other words, it measures right. How much did the price move right over a given period if it moves a lot like you know, a huge percentage volatility is high.

Okay, if it didn't move much, you know, like maybe 0.1 percent a day, 0.05, very small percentage change on a day-to-day basis. We can say that volatility is low when volatility is high. The average true range indicator value is high. When volatility is low, average true range indicator value is low.

Okay, so one thing to be clear: this indicator doesn't measure the trend, it measures volatility. So let's have a look at how this indicator work. So what do i mean by note? One atr be beyond the area of value. So let's say: let's look at the chart, shall we so this is brand crude oil eight hour time frame.

So let's say, for example, okay price came into this area of value this 50 period moving average. Okay. So let's say you want to go along and enter on the next candle open. Maybe you think that you know this is a valid trading setup and you go long at the opening price.

Where do you set your stop loss? Well, you you want to set it right, one atr below your area of value. So in this case, let's say this uh this low over here is your area of value. Is the the low of this uh near the 50 period moving average? This is the swing low at that point in time. So let me just cover the scandal at this point in time.

This is the swing low right, the lowest point of this 50 period area of value. So what you want to do is to pull out the atr indicator, just search for atr click on this comes up this one at the bottom go to settings. I like to use a 20 period atr and i like to use sma click. Ok, so how do you interpret this very simple, so remember, atr indicator is a volatility base indicator when volatility is high, the value goes up, volatility is low, value goes down.

So, if you look at this portion here, this atr value is increasing over time. Why is that? Because if you look at the chart from here all the way down to here notice, the range of the candles from here notice the range of the candles from here what's happening, the range of the candles here are pretty much increasing in size. So when the range of the candles are increasing in size, it tells you that the market is moving more. So that's why your atr value is increasing higher during this period and likewise, if you look at this, why is this atr value here going down? Well, just need to look at the chart you look at from here to here.

You notice that the range of this candles from here to here is decreasing in size. Market is moving, lesser volatility is decreasing. That's why volatility here is heading lower, make sense. Okay, so now, how do you use this volatility concept to set a proper stop loss? So this is what we're going to cover next.

So i mentioned earlier: you want to set your stop loss, one atr below the area of value right. This is, this is an uptrend. So, first and foremost, what you want to do is to find out the current atr value in this case. Is one dollar 1.195 simple, because it's stated here then: what is the value of this swing low over here? So looking at this trading view chart, it tells me that the low is 63.176.

So what i'll do is i'll take 63.176 63.176, which is the lowest price point here, and i minus 180, which is this value here 1.195, and this gives me i'm not going to calculate this with my hit because i suck at you know this mental calculation trusty Calculator is here, 63.176. Minus 1.195 gives me 61.981. Of course you don't have to be so exact to the you know, exact uh fake right, so you can just make it like 61.99 or 62. If you want or 61.95 you want to give it more buffer.

So what this means right, you're going to take this value - let's say 61.99, and that will be your stop-loss level, so we're just going to take this 2 over here. Let's call it! The here is on the line i'm going to change this to red, so it signifies our stop-loss and the value is 61.99. There you go. So how do you interpret this now so very simple, so from this extreme low over here to this red line over here? Okay, this red line is one atr, so in other words, this is your stop loss.

Okay, so if let's say rather, this is the uh, or rather this red line over here is your stop loss over here? So if let's say you enter on the next candle open, if you enter on this next candle open here - let's say it's here: your stop-loss is at this price point this level over here, so from here opening price. All the way down to this red line is your stop loss. Okay. So in this case all right, you can see that you wouldn't have gotten stopped out of your trade, because you know you had you know enough buffer right as your stop-loss.

So let me walk you through another example, because this concept is important. So let's have a look. How about this one here, okay, say close this okay, let's see over here. Let's say we have a.

For example. Let's say you went short right, maybe there's there's a valid trading setup and you notice this strong bearish price rejection on this candle here you know ensure so you again, where should your stop loss be so again? The concept is, you want to set your stop loss right, one atr beyond the area of value, so in this case, where is the area of value area of value? Is here this area of resistance? So within this area of value, this is the extreme high point. Okay, so reference that high point, so in this case the high point, the value is, let me find out what that is. It is 6.515, okay, 6.515, so the high point is 6.515 and what i'm going to do is to add on one atr.

Why add? Because we are now in the downtrend right, our stop-loss, so it should be above 180 r above this swing high, so the current atr value is 0.014, so just 0.014, and that will give us. Let me see six point. Five, one, five plus point zero one. Four six point: five, two, nine six point: five, two: nine.

That is where your stop loss is. So if i were to get again right, the red color line and to draw it out is 6.529 there you go. So let's say you enter on the next candle open, which is here. Okay, your stop loss, let's say enter on the next candle open is here.

Your stop. Loss will be at this rate line over here, so your stop-loss is, in other words from here all the way down to here right. This is the size of your stop-loss, make sense. Okay, so pretty simple stuff right.

Your stop-loss is in essence right. One atr beyond the area of value, so this gives your trade room to breathe. So what this does is that if, let's say the market makes a salad a sudden spike up higher right at least right, your stop-loss is away right from this highs or from here. So you give your trade right more room to breathe and not get.

You know stopped up from all this sudden spike up or down. Of course, it's not 100 foolproof. You will still get stopped up from time to time, but it will, you know, protect you right. Hopefully, more often than not, and that's the concept right behind to why i set my stop-loss in this manner.

Okay, so just remember this one atr beyond the area of value, so your trade has breathing room. And finally, one last pro tip is this: some of you might be wondering hey. Why do you use one atr? What about two atr or three hdr? Now, here's the thing! It's perfectly fine right, you have, you can adjust the the multiple of your stop-loss. According to your needs, but one thing to bear in mind is that the wider your stop-loss is right.

Is that now your position size will be reduced right, so you can accommodate right. Your risk management and, of course, the smaller the size of your stop loss is right. You can afford to put on a larger position size, but the downside to that is that you know you might get stocked up prematurely. So again you can, you know, decide what atr multiple suits you best for me.

Personally, i just simply go with one atr beyond the area of value, so that's pretty much it for stop-loss right now. Let's move on and talk about your exits right. If the market moves in your favor, you.