When day trading, if you are considering taking on a position near the day’s high or low it is necessary to analyse regarding where to place your stop loss. It is possible that due to your risk/reward ratio that by entering a trade too early you will be stopped out at or near the current high or low. This should be avoided as the level may continue to hold. It should require the existing high or low to be broken to trigger your stop loss, therefore, it’s important to calculate this BEFORE entering the trade as there is nothing worse than being stopped out at the high or low of the day!!
Break-out traders will often wait for the current high to be broken and then go long or for the low to be broken before going short. They do this in the assumption the momentum will be sufficient to keep the move going and produce a profit. However, if it is a false breakout, they are likely to lose on the trade.
We demonstrate this and many other techniques during Symax Fintech Academy workshops and courses