See this to know how professionals place their stop loss and target orders. These have to be placed in the correct position. If your stop is too tight then you will be occasionally stopped out of the trade because of the volatility in the market only to see that the price starts moving in the direction of your trade after stopping you out. Placing a stop too far apart means that you are risking too much money on a single trade.
Choose your target levels logically
Similarly, it is important that you also place your targets levels right. Being greedy may make you lose a profit-making trade. On the other hand, if you are fearful and place your target level very close to your entry then you will make very little money on your trade and lose out on the huge profits.
It is important to understand that there is no thumb rule as to where the stop loss and the target levels should be placed. However, there are things that should be kept in mind that will let you figure out the best stop and target levels.
Placing your stops
It is good to first start by knowing where to place the stops. This is important because controlling your risks is an essential part of your trade. The reward is good but focuses on your risk too. Also, the stop loss is what lets you determine what the position size of the trade should be.
General rules for placing stop loss
Make sure to know that the stop loss that you place should be at a logical level. This means that you need a level where you know that the trading signal is invalid and this should also support the market structure.
Let the market let you know when to get out. The market should tell you that your trade is wrong. This is done when the market moves to a level that proves that the trade set up is wrong. Stand to forget trades are great when you do not want to keep monitoring the market. All that you need to do in such a case is to enter the trade and then place your target and stop loss price on the trade. Once the target or the stop loss gets hit, you are out of the trade.
There may, however, be times when you would have to manually get out of the trade. This is before the stop loss gets hit. However, you need to be a professional to be able to do this.