Trade Forex Trading

Introducing Broker - Introducing Traders to Forex Brokers

Stop Loss Trading Summary: Points To Remember When Setting

The key to setting stop losses in Forex trading is not to set too tight or too far and not exactly on the support or resistance levels.

 

A few pips below support or above resistance levels is the best place.

 

If you're going long (buying a currency pair), just look for a nearby support level that is below your entry point and set this order about 30 pips below that support level. The example below show the level where a trader can set up their stops just below the support level on a currency trading chart.

Support Level For Setting Stop Loss Level For Buy Forex Trade

Support Level For Setting Stop Loss Level For Buy Trade

 

If you're going short (selling a currency pair), just look for a nearby resistance level that is above your entry point and set this order about 30 pips above that resistance level. The example below show the level where a trader can set up their stops just above the resistance level on a currency trading chart.

Resistance Level For Setting Stop Loss Level For Sell Forex Trade

Resistance Level For Setting Stop Loss Level For Sell Trade

 

 

You can also use stop loss orders to lock in profits, Not Just for Preventing Losses

The advantage of a stop loss order is that you do not have to monitor on a daily basis how the Forex market is performing. This is especially handy when you are in a situation that prevents you from watching your trades for an extended period of time, or when you want to go to sleep after trading the whole day.



The disadvantage is that the price at which you set these orders could be activated by a short-term fluctuation in a currency price. The key is picking a stop-loss percentage that allows a currency price to fluctuate within the day to day range while preventing the downside risks.

 

These orders are traditionally thought of as a way to prevent losses thus the name. Another use of these orders is to lock in profits, in which case it is referred to as a trailing stop loss.


For a trailing stop-loss order it is set at a percentage level below the current market price. This trailing level then adjusted as the trade unfolds. Using a trailing level allows you to let profits run while at the same time guarantees that should the market turn you will have locked in some of your profits.

 

These orders can also be used to eliminate risk if a Forex trade becomes profitable. If a trade makes some reasonable gains then the stop can be moved to breakeven point, the point at which you bought, thereby ensuring that even if the trade moves against you, you will not make any loss, you will breakeven on that trade.

 

Regulated Forex Broker

Takes 4 to 6 weeks to open an account if you don't follow the correct procedure;

Follow the correct procedure and open your account in 5 minutes, Open Early: Read The Article "Account Opening Procedure"

Risk Appetite Market Sentiment: Risk Appetite Trading in the Forex Market

Eurozone Market Sentiment: Eurozone Economic Growth Gains Momentum Fueling Risk Appetite Trading in Forex

If you are not going to open an account, what is the use of learning Forex tutorials on this website: Open an Account First

185 XM Accounts Successfully Opened through TradeForexTrading, Traders Accounts Presence in 54 countries, Over 100,000 trades Executed: Be Part of Trade Forex Trading Success - Open an Account Here and Help Us get to 1,000 XM Accounts

 

Trailing stop orders are used to maximize and protect profit as a currency price rises and limit losses when the price falls.

 

A good example is when you use the parabolic SAR Forex Indicator and keep moving your stop loss to the parabolic SAR level.

Parabolic SAR Indicator For Setting Trailing Stop Loss in Forex

Parabolic SAR Indicator For Setting Trailing Stop Loss in Forex

 

Another example is where a Forex trader moves his stop by a certain number of pips after every few hours or after every hour or after every 15 minutes depending on the Forex chart time frame that the trader is using.

 

In the example above the parabolic SAR which had a setting of 2 and 0.02 was used as the trailing stop for the above chart. The trader would have kept moving the trailing stop level upwards after every SAR was plotted until the time when the Parabolic SAR was hit and the trend reversed.

 

Conclusion
A stop-loss order is a simple tool, yet so many investors fail to use it. Whether its used to prevent excessive losses or to lock in profits, nearly all investing styles can benefit from this trading tool.

 

 

Points To Remember When Setting These Orders

Here are some important points to remember:

  • Be careful with the points where you set you set these orders. If a currency normally fluctuates 50 points, you do not want to set your order too close to that range else you will be taken out by normal market volatility

 

  • Stop Loss orders take the emotion out of a trading decisions and by setting one you set a predetermined point of exiting a losing trade, meant to control losses.

 

  • Traders can always use indicators to calculate where to set these levels, or use the concepts of Resistance and Support to determine where to set these orders. Another good indicator used to set these orders is the Bollinger bands where traders use the upper and lower band as the limits of price therefore setting these orders outside the bands.

Always click an advertisement after reading an article (give and take & let us help each other, don't also forget to tell others about us the same way others told you about us);

Don't Miss opportunity to trade EURUSD Upward Parabolic Forex Trend;

Parabolic Forex Trend: Momentum and Parabolic Forex Trends - Different Type of Market Technical Analysis

185 XM Accounts Successfully Opened through TradeForexTrading, Traders Accounts Presence in 54 countries, Over 100,000 trades Executed: Be Part of Trade Forex Trading Success - Open an Account Here and Help Us get to 1,000 XM Accounts

Poland FX Seminar Gala

XM Account Holders Attend Poland FX Seminar

XM Account Holders Hungary Seminar

Malaysia Seminar

XM Account Holders Phillipines Seminar

XM Account Holders Thailand Seminar

XM Forex Broker Regulation Licenses

How a Real Forex Account Looks Like

How A Real Forex Trading Account Looks Like

Up To $6.67 Dollars Bonus for Every Lot Traded

Loyalty Bonus Points - Up To $6.67 Dollars Bonus For Every Lot Traded

Forex Trading Accounts Members Area - Withdraw and Deposit Options

Real Forex Trading Account Withdraw and Deposit Options

XMP Forex Loyalty Bonus Program

Forex Loyalty Bonus Program

Silver and Gold Online Trading

XM Rally Car

Regulated Broker

 

Open Forex Account

Open Demo Account
Open Real Account

Forex Broker Rankings

Up To $5K Bonus

Forex Account Opening Bonus