Trend, support and resistance
What you learn in 3 minutesThis lesson shows how to read levels on a chart where price has turned before, and how those levels can help you decide where to place a stop. Using USD/INR around 83.2500, you will see how a stop placed just beyond a level can be sized in rupees, so you know the cost before you enter.
Three touches and a stop at ₹3,000
| Step | Amount | Note |
|---|---|---|
| Support level | 83.2500 | Price turned up from this level three times on the chart. |
| Entry after third touch | 83.2600 | A small move above the level after the third bounce. |
| Stop placed below support | 83.2300 | 30 pips below the entry, just under the level. |
| Pip value per standard lot | ₹10 | One pip on one standard lot of USD/INR is ₹10 (100,000 x 0.0001). |
| Risk on one standard lot | ₹300 | 30 pips x ₹10 per pip. |
| Risk on 0.10 lots | ₹30 | 0.10 lots is one-tenth of a standard lot, so ₹300 x 0.10 = ₹30. |
Your broker may round the pip value, charge a spread or commission on top, and quote a slightly different price. The exact cost can vary between brokers.
The mistake people make here
The common mistake is to place the stop exactly at the support level, or to move it further away after the trade goes against you. Price often dips just below a level to trigger stops before turning, so a stop a few pips beyond the level is more realistic. Decide the stop distance before you enter, and keep it fixed. If the market moves past your stop, accept the loss and move on.Check yourself
If you enter at 83.2600 and place a stop at 83.2300, how many pips is your risk, and what is that in rupees on 0.20 lots?
The difference is 83.2600 - 83.2300 = 0.0300, which is 30 pips. On one standard lot that is 30 x ₹10 = ₹300. On 0.20 lots it is ₹300 x 0.20 = ₹60.
If you risk ₹500 and your stop is 25 pips away, what lot size keeps you within that risk?
25 pips on one standard lot is 25 x ₹10 = ₹250. To risk ₹500, you would need 500 / 250 = 2 standard lots. But check that this size fits your account and the margin your broker requires.