Speaker A
How's it going everyone, and welcome back to another video. In this video, we are going to talk about stop-losses, specifically how to refine them within my fractal model. So, let's get into the PDF.
TTrades explains how to refine stop-losses within his fractal model, placing stops at the swing point or candle body beyond 50% of the opposing run, with chart examples.
Key Takeaways
- A stop-loss must mark true invalidation of the trade idea, not an arbitrary level.
- Measure the opposing run and place stops beyond its 50% level to avoid premature stop-outs.
- Body-based stops are only valid when the bodies extend beyond the 50% of the opposing run; otherwise use the swing point.
- Refining stops can improve risk-to-reward, enabling roughly 2R targets.
What the video covers
- Stop-loss defined as the point where a trade idea is invalidated, placed at the swing point of a continuation or protected swing.
- Refinement option 1: place the stop at the swing point; option 2: place the stop at the candle body, with specific rules to avoid impacting invalidation.
- All refinement rules revolve around the 'opposing run': the change in state of delivery or continuation swing, measured from the swing low/high back to the swing that formed it.
- Mark the 50% level of the opposing run; stops should sit beyond this level because price may retrace to 50% and still remain valid.
- If candle bodies do not extend beyond the 50% level, refining the stop to the body risks being stopped out before the intended move, so the swing stop is used instead.
- Reversal entries on the retest and continuation entries are both covered, with stop placement adapted to each.
- Ideally bodies should respect 50% of the opposing run, though mechanically the requirement is that the stop lies beyond that level.
- Examples show trades targeting roughly 2R, including one targeting the previous day's low as a short-term target.
- Stops placed on a swing that is too close can be swept while the setup remains valid, which the presenter cautions against.
Full Transcript — Download SRT & Markdown
Speaker A
stop-loss is with a given entry where the trade is wrong. We want this on an invalidation. So if price does hit this, we are wrong on the idea and it's not going to go to our target and we will
Speaker A
So, what is a stop-loss? A stop-loss is, with a given entry, the point where the trade is wrong. We want this to be an invalidation. So if price does hit this, we are wrong on the idea, it's not going to go to our target, and we will feel bad about it because our trade was invalidated.
Speaker A
entry at the market, put my stop on the swing low and look for my target and you can see how that pans out. Now a lot of times I'll want to refine that stop loss. And so I have two different
Speaker A
Now, generally speaking, I always put my stop loss on the swing point of a continuation or a protected swing. So you can see here, once we form this protected swing, I can take an entry at the market, put my stop on the swing low, and look for my target, and you can see how that pans out.
Speaker A
must follow so that this doesn't impact the actual invalidation of my trade. So all of those rules are revolved around the opposing run. What is the opposing run? Well, we find that change in the state of delivery or that continuation
Speaker A
Now, a lot of times I'll want to refine that stop loss, and so I have two different options for that. One, I can put my stop at the swing point. Or two, I can put my stop at the candle body. Now, if I'm going to refine this and put my stop at the body, I have a few specific rules I must follow so that this doesn't impact the actual invalidation of my trade.
Speaker A
but we're going to mark out 50% of that range. Now, looking at 50% of that range, I want to make sure my stop losses are below 50% of that range because price can come back to that 50%.
Speaker A
So all of those rules revolve around the opposing run. What is the opposing run? Well, we find that change in the state of delivery or that continuation, and we look at the opposing run. The opposing run is that swing low. And then we're going to find the swing high that made that swing low. This is the same as what we use to measure for projections, but we're going to mark out 50% of that range.
Speaker A
either stop-loss in this position. Now, here is one where I would not be able to validly refine my stop loss. And the reason for that is if we look at this opposing run here from this opposing swing to the high and 50% of that, the
Speaker A
Now, looking at 50% of that range, I want to make sure my stop losses are below 50% of that range, because price can come back to that 50% and still remain in respect and continue higher. So you can see here, with these large bodies, the opposing body and the opposing swing for a stop-loss would both work, because they are beyond that 50% of the opposing run. So I could use either stop-loss in this position.
Speaker A
remaining in respect to this structure. So, here I want to make sure my stop is beyond that 50% point or on the opposing swing. Let's get into trading view and we will go over a few examples of this
Speaker A
Now, here is one where I would not be able to validly refine my stop loss. And the reason for that is, if we look at this opposing run here, from this opposing swing to the high, and 50% of that, the bodies do not go beyond 50% of that. So if I put my stop on the body, what am I setting myself up for? A run of my stop loss before price continues in the intended direction, because this is still remaining in respect to this structure. So here I want to make sure my stop is beyond that 50% point or on the opposing swing.
Speaker A
We're not just going to randomly look for entries. What do we have here? A candle to closure. We have that change in the state of delivery and we've formed a continuation. So, if I'm looking to take an entry here, where are
Speaker A
Let's get into TradingView, and we will go over a few examples of this so you can see it and understand it better. So here we are in our first example, and we are going to focus on when there is a valid framework, right? We're not just going to randomly look for entries.
Speaker A
like so. Those are the two differences. Now, which would work? Which one is valid? Well, what we're going to do is take the opposing run. So, what is that?
Speaker A
What do we have here? A candle to closure. We have that change in the state of delivery, and we've formed a continuation. So if I'm looking to take an entry here, where are my two options for a stop-loss? Let's say I'm entering at the retest. I could either put my stop loss on the body, like so, or I could take the same entry and put my stop loss on the opposing swing, like so. Those are the two differences.
Speaker A
valid, and continue lower. So, which one works? They both work. They are both beyond that 50%. And price could move in here and not take us out of the position. So we could look for either of these trades to give us around 2 R and
Speaker A
Now, which would work? Which one is valid? Well, what we're going to do is take the opposing run. So what is that? From the high of our stop loss to the swing that made it, there is our opposing run. So if we move this over, we need our stop loss beyond this point, because price could reach up to here, remain valid, and continue lower.
Speaker A
Right? I don't want my stop loss right there or at 50% of this protected swing here because price we want it to respect that area. Right? So we want our stop loss in a logical spot beyond that point
Speaker A
So which one works? They both work. They are both beyond that 50%, and price could move in here and not take us out of the position. So we could look for either of these trades to give us around 2R and see what happens. You can see it respects, and then do we get a continuation? We do get a continuation lower. But you can see here how price went up to that 50% of the opposing run. I don't want my stop loss right there, or at 50% of this protected swing here, because we want price to respect that area. So we want our stop loss in a logical spot beyond that point and beyond 50% of the opposing run.
Speaker A
frame to the upside, how could we? We're going to talk about the reversal entry as well as the continuation. So some people like to take reversal entries on the retest. So if I was going to do that, where could I put my stop loss?
Speaker A
So this is an example where both of these positions for our stop-loss are valid.
Speaker A
away from, find the series of candles that form that change in the state of delivery, mark out the high, I need my stop loss below that. Now, another confirmation you can use when refining this specifically on the change in the
Speaker A
So here we are in our next example. We have a candle to closure. If we wanted to frame to the upside, how could we? We're going to talk about the reversal entry as well as the continuation. Some people like to take reversal entries on the retest, so if I was going to do that, where could I put my stop loss? Either on this swing point or on the body, right? That is how I look to refine my stop loss.
Speaker A
However, mechanically, I just require this. So my stop loss could go on the swing or on the body here as it's beyond 50% of that and then I could look for 2 R. Now let's see what a continuation
Speaker A
Now, I want to make sure that if I mark out the opposing run, so from the swing low we're trading away from, find the series of candles that form that change in the state of delivery, and mark out the high, I need my stop loss below that. Now, another confirmation you can use when refining this, specifically on the change in the state of delivery, is you want to see 50% of these bodies be respected. So ideally, we want our stop below both of those. However, mechanically, I just require this. So my stop loss could go on the swing or on the body here, as it's beyond 50% of that, and then I could look for 2R.
Speaker A
Respecting the T-spot. It forms that continuation. Let's go ahead and mark out the opposing run. Right here is our opposing run. And if we're going to take an entry on that closure through, where could I put my stop loss? I could put it
Speaker A
Now let's see what a continuation looks like. So here you can see we formed a continuation, right? We're expecting this low to remain, respecting the T-spot. It forms that continuation. Let's go ahead and mark out the opposing run. Right here is our opposing run. And if we're going to take an entry on that closure through, where could I put my stop loss? I could put it on the swing here, which is valid. If I wanted to refine it, is it valid? Yes. It's getting quite close to 50% there, so maybe I give it a little more room. But both of these are mechanically valid, because it is beyond 50% of that opposing run. So let's see how this works out. That also works out as well.
Speaker A
Right. It's getting quite close to 50% there. Right. So, maybe I give it a little more room. But both of these are mechanically valid because what? It is beyond 50% of that opposing run. So, let's see how this works out. That also
Speaker A
Let's get into a few more examples. So here we are in another example. You can see it is a bit choppy, but we have a candle to closure with an SMT on the high and a change in the state of delivery. So we can be looking for a continuation in this move here. Now if you look, what do we do? We open, we take out these swings right here, taking out the consolidation high. And what are we wanting? We want to see this protected swing be left. So we're looking for this to form a swing and to trade lower.
Speaker A
the state of delivery. Right? So, we can be looking for a continuation in this move here. So, now if you look, what do we do? We open, we take out these swings right here. Taking out the consolidation high. And what are we wanting? We want
Speaker A
So with this continuation that has formed, what are we looking for? We want to measure that opposing run, right? So we mark the high we're trading away from, we find the swing low that formed it, and that is our opposing run. But what do we want to see? We want our stop loss beyond that point. So if we're going to take a look and enter on the closure, what are our options? An entry right there, our stop on the swing, looking for 2R. Or we can refine our stop loss to the body. So if we run our stop loss to the body, what do we notice? Our stop loss is not beyond that 50%. Right? So what could happen? Price could sweep us out, remain valid, and continue lower.
Speaker A
we're trading away from. We find the swing low that formed it and that is our opposing run. But what do we want to see? We want our stop loss beyond that point. So if we're going to take a look
Speaker A
So this is a case where the bodies don't align with that. We want to put our stop on that protected swing, or the actual swing part of it. If you take a look, that keeps us in this trade and aligned with structure. We're not getting taken out of a trade when it is still technically valid. So one risk you have to understand is that if you are refining your stop loss, let's say here you decide to put it there, you can get taken out of a valid trade. That is part of what happens when you try to get more R by refining your invalidation.
Speaker A
do we notice? Our stop loss is not beyond that 50%. Right? So what could happen? Price could sweep us out and remain valid and continue lower. So this is a case where when the bodies don't align with that, right? We want to put
Speaker A
Let's get into a few more examples. So here we are in another example. Let's see what happens. We form a new continuation in candle 4, so that intracandle change in the state of delivery. So let's say I wanted to take a long position. Where could I put my stop? I could put my stop on the swing here or on the bodies. Now we do notice those bodies are quite small.
Speaker A
still technically valid. So, one risk you have to understand is if you are refining your stop loss, let's say here you decide to put it there, you can get taken out of a valid trade. That is part of what happens when you try to get more
Speaker A
R by refining your invalidation. Let's get into a few more examples. So, here we are in another example. Let's see what happens. We form a new continuation in candle 4. So that intracandle change in the state of delivery. So let's say I
Speaker A
wanted to take a long position. Where could I put my stop? I could put my stop on the swing here or on the bodies. Now we do notice those bodies are quite small and quite shallow. Let's take a
Speaker A
look at the opposing run here. We mark that out. And what is that? Our stop loss is right around that mark, right?
Speaker A
We want to see that be respected. So a lot of times when we have very shallow bodies, that's when I like to go beyond that or put it on the swing. But let's see what happens here.
Speaker A
Right? You can see we get ran out of the position while it remains valid structure- wise, right? It doesn't take out this swing low. So, a lot of times when you have that small body on the continuation here and the opposing run
Speaker A
is right around that area. I don't want to jam my stop loss. I want to give it room to breathe and to stay into that position. So, this is an example of one where I would want it on that swing
Speaker A
because I don't really have trust in these small bodies holding. Plus, it's right around 50% of that opposing run.
Speaker A
So, if you do put it on that opposing body, that is a risk you are taking in terms of getting ran out of the position while it is not invalidated. So, hopefully you are getting the hang of it
Speaker A
at this point. But, let's go over a few more examples. Here we have a candle three closure. Let's take a look at all these continuations or reversals. Right here, we form a reversal. We'd want this high to remain. Let's take a look at the
Speaker A
opposing run. So with this opposing run, the bodies are beyond that. So you could anticipate price not to reach back up to this body. It gets quite close, but it doesn't. In this next day, we form a new
Speaker A
continuation. Let's take a look at that opposing run here. The bodies are beyond that. So we could anticipate what? We could anticipate this body to not be reached for if we're going to get a continuation lower. And this is because
Speaker A
we don't want to see deep retracements and expansion. Now taking a look at this opposing run here, right? We're forming a new intra candle change in the state of delivery in this higher time frame model, right? Looking for this previous
Speaker A
day low and further. And what do we have? We have a new intra candle change in the state of delivery. Now, let's take a look at this opposing run. So, we mark the high and what do we notice?
Speaker A
This is the low down here that we'd be trading away from. It doesn't really make sense to put my stop loss beyond exactly the part where I'd be looking to enter. And in this case, what I'm going to do is I'm just going to use the
Speaker A
series of candles and then I would mark out the lower time frame swing. So from this high, we know on a lower time frame when we have this down close candle, that's going to form a swing low. So I
Speaker A
can use that level there. And I want my stop beyond that. I can also add confluence by using 50% of the bodies there. Want my stop loss beyond that. So here, if I'm going to take an entry, I
Speaker A
could look I could put my stop on the bodies here, expecting that to hold. And you can see how that gives me 2 R to that previous day's low. If I put my stop on this swing here, I'm not going
Speaker A
to get 2 R to that previous day's low. So, this is a good example of when I would want to refine it is because I want to get 2 R to my short-term target.
Speaker A
Let's see what happens here. You can see that remains in respect. We get our 2R and we could hold runners if we want and we get more R out of that position versus if we had our stop loss on the
Speaker A
swing. So refining it can help you get more R, but you have to accept the fact that there are going to be times where you might get taken out of your position while it remains valid from the swing
Speaker A
point. So here we are in one final example and you can see that we have formed a continuation here. So now taking a look measuring that opposing run, what do we notice? It's super close to the bodies here, right? It's almost
Speaker A
right at the bodies. But would I really want to take a position here and put my stop right at the body? probably not because if price comes down into this area, that's still valid to me, right?
Speaker A
That's what it really means. Price could come down into this area and it's still valid. So, if I do want to refine my entry in this area or get better risk-to-reward, I still need to have a valid stop-loss, the way I would get
Speaker A
better risk-to-reward is if I want to refine my entry into these areas that should be respected. But if you notice, if we put it on the body here, what can happen as we let that continue, you can see it
Speaker A
almost immediately gets invalidated. So, if you want to get better risk-to-reward or refine your entry in this area, you're going to do that by refining your entry, not your stop-loss. But with that, I hope you guys enjoyed this
Speaker A
video. If you did, please leave any questions below in the comment section and like and subscribe. I'll see you guys in the next one. Have a good one.
Topics:stop lossfractal modeltradingrisk managementopposing run50% retracementprice actionsmart money conceptsTTradesrisk to reward
