To succeed in trading, it is crucial to correctly set the stop loss and take profit levels. Whether you are involved in long positions or short positions, these techniques can help you effectively control risk and lock in profits. So, how should we reasonably set these key pieces of information?

First, you need to clarify how much risk you can accept. In most cases, it is recommended not to let the risk of a single trade exceed 1-2% of your total capital. If you set a higher risk, it may affect the safety of your funds.

Next, we need to focus on an important concept: support and resistance levels, which are price points where the market may stop or reverse. Understanding these can help you set stop loss and profit targets more accurately. For example, in long positions, you can place the stop loss slightly below the support level and the profit target below the resistance level. In short positions, it is the opposite.

In addition, calculating the risk-reward ratio is also a very good strategy. Generally, setting the risk-reward ratio to 1:3 is a common standard. It's like telling yourself that the potential gains should be three times the losses:

- Stop loss position: Identify the point of loss that you cannot accept, such as a capital loss of 1%.
- Profit position: Set a point that makes you satisfied with the profit, such as a 3% increase in capital.

Of course, we can also obtain more accurate data through technical indicators. For example, Moving Averages can help you identify trends, while the Relative Strength Index can reveal whether the market is overbought or oversold. In addition, the Average True Range can assist you in assessing volatility, allowing you to set stop loss more precisely.

Let us illustrate with a practical example:

Long positions: Suppose you enter at 100 dollars.
- Support level: $95
- Resistance level: 110 USD
- Risk-reward ratio 1:3
- Stop loss set at $95 (risk is $5)
- Profit set at $115 (gain of $15)

Short positions: Assume you enter at 100 dollars.
- Support level: $90
- Resistance level: 105 USD
- Risk-reward ratio 1:3
- Stop loss set at $105 (risk of $5)
- Profit set at $85 (profit is $15)

Remember, the market is dynamically changing, and you need to continuously assess and adjust your levels. This logic not only applies to market operations but also increases your chances of trading success. Of course, keep in mind that the above strategies and opinions do not constitute specific investment advice and are for reference only! If there are any changes, adjustments must still be made according to the latest market dynamics. 😊