How to Use Stop Loss CFD Orders in CFD

How to choose you stop loss level the target stop loss should be based on various strategies depending on your type of cfd method.

The 3 methods of selecting stop loss levels are:

Strategies & Techniques of Setting Stop Loss CFDs Orders In CFD

Traders using a cfds system must have mathematical calculations that reveal where the order must be placed.

A trader can also place a stop-loss order according to the technical indicators used to set these orders. Certain technical indicators use mathematical equations to calculate where the stop loss order should be set so as to provide an optimal exit point. These technical indicators can be used as basis for setting these orders.

Traders also place these orders according to a predetermined risk to reward ratio. This method of setting is dependent upon certain math equations. For example a ratio of 50 pips stop-loss can be used by a trader if the trade has potential to make 100 pips in profit: this is a risk:reward ratio of 2:1

Other traders just use a predetermined percent of their total cfd account balance.

To set a stop-loss it is best to use one of the following methods:

1. Percentage of CFDs account balance

This stop-loss setting method is based on the percent of account balance that the trader is willing to risk.

If a trader is willing to risk 2% of account balance then the trader decides how far he will set the stop loss order level based on the trade position size which he has bought or sold.

Example:

If a trader has a $10,000 account and is willing to risk 2%

• If the trader buys 1 mini contract

  1 pip = $1

  Then setting at 2 %

  2% is $ 200

2. Setting Stop Loss CFD Orders using Support & Resistance Levels

Another way of setting cfds trading stop loss orders is to use supports and resistance levels, on the cfds charts.

Given that stop loss orders tend to congregate at key points, when one of these levels is touched by cfd price, other cfds trading orders are set off. Stop loss orders tend to accumulate just above or below the resistance or support levels, respectively.

A resistance or a support level should act like a barrier for the cfd price movement, this is why they are used to set stop losses, if this barrier is broken the cfd price movement can go toward the opposite direction of the original cfd trade, but if this barriers (support and resistance levels) are not broken the cfd price will continue moving in the intended direction.

Stop Loss CFD Order Level Setting using Resistance Level

Setting stop loss order above the resistance level

Stop Loss CFD Order Level using Support Level

Setting stop-loss order below the Support Level

3. CFD Trend Lines

A cfds trendline can be used to set stop losses where the stop-loss order is set just below the trend line. As long as the trend line holds the trader will be able to continue making profits while and at the same time set this stoploss order which will lock his profit once the trendline is broken.

Setting stoploss order below the trendline

Example of where to set this stop-loss order using cfds trend lines.