Methods of Setting Stop Loss CFDs Orders In CFD

Traders using a cfds trading 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 indicators used to set these orders. Certain indicators use mathematical equations to calculate where the stop loss order should be set so as to provide an exit point. These trading indicators can be used as basis for setting these orders.

Other 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

Others just use a predetermined percentage of their total trading account balance.

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

1. Percent of CFDs account balance

This is based on the percent of account balance that the trader is willing to risk in cfds trading.

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

Example:

If a trader has a $100,000 account & is willing to risk 2% then the position size of the trade that they will open for CFD Trading will be determined by this 2% stop loss level.

2. Setting Stop Loss CFD Order using Support and Resistance Levels

Another way of setting stop loss orders is to use supports & resistance zones, on the trading charts.

Given that stop-loss orders tend to congregate at key points, when one of these levels is touched by cfd price, others are set off, like dominos. 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 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 & resistance levels) are not broken the cfd price will continue heading in the intended direction.

Stop Loss CFD Order level using a resistance zone

Setting order above the resistance

Stop Loss CFD Order level using a support Level

Setting order below the Support Line

3. CFD Trendlines

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

Setting order below the trend line

Example of where to set this order using cfd trend lines.