Lessons › Why traders lose › Where your idea is wrong
World 11 · Why traders lose · lesson 3 · level 2
Where your idea is wrong
Put the stop where the idea is wrong, plus room for normal noise, not one tick under the obvious low.
In one line
One tick too close, and a trade that works still costs you money.
Explained simply
When price breaks a recent low, it often dips just under it and comes straight back. We checked 28,975 of those breaks: more than half closed back above the low in the same candle. A stop one tick under the low gets hit every time. Giving it room, like half of a normal candle, lets more trades survive the dip. Room is not magic, though. Most real breaks keep going, and then you want to be out.
Mistakes to avoid
- Putting the stop exactly one tick under the last low.
- Giving the stop more room but keeping the same size, so the dollar risk grows.
- Thinking a wider stop means you cannot lose.
Check yourself
When price broke below a recent low (28,975 cases), how often did that same candle close back above it?
More than half. 51.5% of the breaking candles closed back above the low.
Your stop is one tick under the low. When price dips under the low, the stop is…
Hit every time. Any dip under the low reaches a stop that sits one tick under it.
With half a normal candle of room, how often did price bounce a full candle back up before touching the stop?
36%. 36% of the dips bounced a full candle first. With a full candle of room, 57%.
You give your stop more room. What else must change?
Make the size smaller, so the dollar risk stays the same. A wider stop at the same size risks more money. The one-line rule shrinks the size.
Is extra room a guarantee?
No: most breaks still went deeper within 12 candles. In 87% of the breaks, price went at least half a candle deeper within 12 candles.
Goal of this lesson: Place a stop with room for noise, and size it with the one-line rule.