World Champion LIVE Trading: Exact strategy for the PERFECT stop-loss!
Tom Forward demonstrates his stop-loss methodology using volume-profile concepts and risk-reward ratios. He shows real trades: an S&P 500 position he trailed to 4:1 reward, an 8:1 NASDAQ counter-trade, and a crude-oil trade that failed because the stop was too tight. The key is honest math and psychological discipline to accept sub-50% win rates.
Chapters
The real World Cup Championships trading strategy with the right stop loss. Today I give you explanation of a live session where I have done a lot of trades and I got a lot of stop losses. But what is the reason behind where you can choose your stop loss levels and what are the real points you have to use it? It is so important to take it on the right place and I explain you today what is in my eyes the best place for real stop loss. Trust in me. I'm Tom Forward. I'm the Champions Maker. I trained a lot of traders like Christoph Radeker or especially my friend and colleague Patrick Nill, 2 times World Cup Championships leader in the Robins World Cup Championships. And I think it is so important to understand how you can use the right levels for your stop loss.
Trust in me and give me a hug. What is much more important than knowing exactly where my trade is going to go? I can tell you that it's the stop loss, and sometimes we might not set it quite perfectly, and then we get taken out of the market. But letting the trades that are running continue to run, that is a great art and almost impossible for many traders. And today I want to show you how I plan such trades, where I set the stops, and what happens if I've done it wrong. And yes, exactly, the math behind it is the all-decisive factor. And then you still feel reasonably comfortable despite everything, even if the session wasn't perfect. And I'm going to go through that with you today. Let's start with the planning of the S&P trade that I completed here. What was my idea? That was the previous day, and you can already see it. There was a nice buying tail here, so strong buyers. A nice selling tail, strong sellers, and with a huge volume as well. And here was the equilibrium zone. And now comes the crucial part. Day 2 after that was the market opening. Very, very, very, very, very far away from the previous day. And what is the best trade now? Sure, if we run back up here and then get a counter, but unfortunately that's not often the case. Therefore, always look a bit outside the box and take an additional look at this profile here. And when I look at that, I immediately see, ah, here was value high, ah, here was a buying tail where strong buyers came in. Therefore, I assume that a reaction will occur here. And now the question is, what reaction will come here, and will I use it to enter the trade? And here you can see it wonderfully, that the market simply had rejection up here, and I could then dynamically recognize that there was simply an absolute selling overhang. And so I opened my position here. I said, if we go over this again, there's a high probability we'll run to value, what I just showed you, so where the fair prices are. And that's why I entered this trade. But why did I enter it? Because it was clear to me that the risk is very manageable and my planned profit run is very, very large. Because we had the market opening down here and the market opening was very fast. And when something is very fast, there's usually no big foundation in between. And if there's still a support here, like the one I just identified, I simply assume the market could work through that again. But how did it continue then? The market then took quite a while up here to finally really get going. It also almost stopped me out. It was really relatively close. And then I decided to also trail the stop loss to the high. And with that, I naturally increased my theoretical risk-reward ratio even further. But you always have to stay honest with yourself. That wasn't the actual risk. The actual risk was a bit higher. And therefore, always consult the math of the first trade for the whole thing. And here I waited patiently. I saw that there was simply a nice selling overhang up here. And look here, very crucially, the volumes kept getting lower and lower. That means the people up here weren't blasting in like crazy anymore. And so for me, the probability was higher that the whole thing would work out now. Here the trade's risk-reward ratio was already at, uh, greater than 1. But what is my win rate? Well, for such counter-trades, it's usually below 50%. And that's why I need long winning streaks. And in this case, I had a risk-reward ratio that was actually really cool. It was at around 4:1. Let's move on. The market then really ran down, fortunately giving me my nice take profit down here, and that was really cool. I want to show you another trade that I booked then, and that was NASDAQ. And yes, you then have a cluster risk, but what was the story here? The market had also made its balance here, played exactly the same game as before. And then I did the following and placed another limit order here in case it picked me up again, and it did. And so I had a risk-reward ratio of 8 here, gigantically cool, and I took that one too. But let's get to the trades that maybe didn't go quite so smoothly, and that's also very, very important to understand. Let's take a look at crude oil, and crude oil was quite simply defined by me like this: Up here was the open, market opening, and down here was the equilibrium again. Look here, here I also had the assumption that we could already stay put because the market had opened far above the previous day. So for me, an absolute sign of strength. And yes, anyone who knows the fundamental stories behind it a bit better knows that there are currently just a lot of problems in the Middle East. And so you probably also have more ease from within to say crude oil will now rise even further. And the index futures will then also fall accordingly. But what happened then? And that was quite exciting. Therefore, this price range, we have to remember that I actually wanted to buy there, either here or here. And that's what I did, and the following happened. I booked the trade after I saw on this balance zone here that a reaction occurred there, and another reaction occurred, and then I also set my stop loss relatively tight. Remember the level 9246. And now I'll show you something. Look here, the level of our value area and also of the previous day's VPOC was in the range between 9250 and 9220. But in the end, I set my stop loss here in a price range where there's always a chance it'll be hit again because my mind was still stuck on this price range, and then I simply made the mistake. And didn't place my stop loss here accordingly. And yeah, the result of that is quite simply this: the market then took me out. And the way it took me out, I'm sure some of you can relate to that. Down here, after I went long, yeah, the market then just gave me a truly wonderful stop loss, which honestly felt like it was simply gifted to me, and then it just took me right out of the market, specifically 2 ticks lower than where my stop loss had been set. And that's annoying, of course. But what is the most crucial thing behind it? The most crucial thing is that we have to look at why this happened to me. Did I make a mistake, or did the market play a game that was just different from what I had planned? And I can say, and it is absolutely clear, no, I definitely placed my stop loss in a price range that was not smart at the time. So I then started a re-entry. Why did I do that? Because I saw that down here, after I was stopped out, the market was incredibly stable and started moving in my favor again. And that prompted me to use this bias stability again, even though I was kicked out, to re-enter the market. Yeah. And I then placed my stop loss below the last swing low again. Why did I do that? I want to show you that again. The market was then traded again specifically right here very strongly by the buy reaction, and I said, okay, the probability that the thing will go up again after all is very high. But where did it go then? And if you look at the course of events where we've been, yeah, you have to clearly say that I chose the first exit quite well here. And am I sad then? No, that too was a huge risk-reward ratio because in hindsight we all know the market went much higher. Yeah, but that's predictability, and predictability is incredibly important. So you definitely need to know your key figures, and I hope some of you can relate to this, and above all has the courage to make reentries immediately when the market does it at the right spot and when you see that the buyers are actually there. So first, is there even an opportunity at this price range, or is it just a case of me jumping back in because I feel like I have to be part of have it again, or else I also have real proof from Dynamic Bias that it makes sense there. I hope you enjoyed this video. It gave me a lot of pleasure to present this to you. It's also very important to me to always present something when mistakes have happened. But you learn from mistakes. And I'll say see you very soon. Many thanks.
