Trading Discussion How to set stop loss order properly?

[Somrat4030]

When you start trading online, you will come across new and unfamiliar terms, one of which is ‘Stop Loss’ or ‘Stop Orders’. In simple terms, Stop Loss is an automatic order to buy or sell an instrument once its price reaches a specified level, commonly known as ‘the Stop Price’. The order is executed automatically, which saves you having to constantly monitor your deals. It also serves as protection from excessive losses.



A stop loss can be mental or physically placed. An example of a mental stop loss is a trader buying the EURUSD at 1.1250 and saying they will get out if the price drops to 1.1225. They are risking 25 pips, but when the price reaches 1.1225 they will need to manually get out since an order hasn’t been placed to do so.

Mental stop losses are typically used by day traders who can watch their screens in case the stop loss price is reached, or by long-term traders who can monitor their charts every once in a while and still have time to see when the price is creeping up on their stop loss level.

Stop Loss advantages:

1. Offers protection from excessive losses
2. Enables better control of your account
3. Helps monitor multiple deals
4. Executed automatically, at any time
5. Easy to implement
6. Allows you to decide what amount you are willing to risk.

Approaches to Placing Stop Orders:

1. Fixed-size Stop-Loss.
The given approach implies placing Stop orders which size is defined as a fixed value in points and a fixed percentage value of the deposit. It is rather easy to set such a stop-loss, but using them is much like coin tossing: you never know whether price touches it or not.

2. At the Support and Resistance Levels.
The given approach is described in most classical books on trading and is the most popular one: it implies setting stop-losses at the levels of so-called “overhighs” and round price levels (round-numbered price levels, e.g. 1,3500). As a rule, many Stop orders are accumulated at these levels.

3. Beyond the High/Low
Levels and Round Price Levels.
The given approach is contrary to the previous one. The point here is not to set stop-losses where most market participants do it.

Where you can learn more about stop loss order:

Forex Blog: You can learn more about stop loss order at forex blog. Inside a forex blog have many forex trading related article. You can read that articles for learning more about stop loss.

Forex Forum: Forex forum is a best place for learn more about forex trading and stop loss order. Inside a forex forum, forex experts share their trading experience and knowledge. Moreover, you can ask question frequently to forex experts inside forex forum.

 

[Dita Walczak]

Risk can be managed by using a stop loss. Risk management is very important in trading. But to manage this risk, I must work with the planning. If you work by maintaining plan and discipline, you can make a lot of profit.

 

[Victorial]

Even when you set STOP LOSS, you might tend to miss out on a good trade. Some trades will just shoot down to touch the Stop loss and zoom back up to continue the move in that direction. And sometimes if you don't set the stop loss, you might lose all your funds if you trade in an opposite direction

 

[Somrat4030]

Even when you set STOP LOSS, you might tend to miss out on a good trade. Some trades will just shoot down to touch the Stop loss and zoom back up to continue the move in that direction. And sometimes if you don't set the stop loss, you might lose all your funds if you trade in an opposite direction

I think setting stop loss is good for traders, because, losing all funds is not helpful for newbie.

 

[Mandy96]

This is a very sensitive feature in the forex trading business. Do not underestimate its power. If you do not know much about this then there are some level of certainty to lose the money you invested initially, it is somehow mysterious sometimes but you would not get to realize until you have lost a lot of money which could ruin your chances of becoming a successful online trader. Some people do not see it this way. They just think you can easily invest your money and you will surely be profited at the end but the truth is, it doesn’t work that way.

 

[Good-Guy]

I have never been a forex trader myself. However, I am aware of "Stop Loss" feature because this feature is also available in cryptocurrency trading. I know that it can be used to prevent losses in the long run. However, I still have no idea how it works. I am using Payeer to trade cryptocurrencies and I think I need to figure it out.

 

[tetramorium]

It’s an informative post. The process of placing a stop loss must be strategic and not random. If you set a stop loss that is too tight then it will be hit in no time and you might lose a profitable opportunity, but if the stop loss is too wide you are likely to lose a big amount.

 

[Somrat4030]

Thank you so much.

Stop loss is one of the part of risk management strategy in forex trading.

 

[Mary Frederick]

A good plan is essential for better trading. Traders should look for knowing the platform and understanding the market first and then they should jump into trading. Otherwise, gaining from the Forex market will be really difficult. FXOpulence provides a platform free of requotes and slippage.