How to Calculate Stop Loss CFD Order

The most important question about setting your stop loss order is how close or how far the stop loss order should be set from the cfd price where you entered the position. Where you set this stop loss order depends on several factors:

Since there are no cfd trading rules set in stone as to where you should place your stop loss order, we follow general guidelines used by CFD traders to help them calculate where to place a this stop loss order correctly.

Some of the general guidelines used to set stop loss orders are:

1. Percent Risk Per CFD Trade - How much a trader is willing to lose on a single cfd trade. The general trader rule is that a trader should never lose more than 2 percent of the total account capital on any single cfd trade.

2. CFD Trading Market Volatility - this refers to the daily cfd price range of cfd price movement. If a cfd price movement of a cfd trading instrument routinely moves up and down in a range of 50 pips or more over the course of the day, then you cannot set a tight stop loss order. If you do, you may be taken out of the open cfd trade position by the normal cfd market volatility.

3. CFD Trading Risk to Reward ratio - risk reward ratio this is the measure of potential reward to risk. If the cfds trading market conditions are favorable then it is possible to comfortably give your cfd trade more room when setting stop loss orders. However, if the CFD Trading market is too choppy it then becomes too risky to trade cfd without a tight stop loss order then do not make the trade at all. The risk to reward ratio is not in your favor and even setting a tight stop loss will not guarantee profitable results. It would be wiser to look for a better cfd to trade at another time.

4. CFD Trading Position Size - if the cfd trading position size traded is too big then even the smallest decimal cfd price movement will be fairly large in risk percentage terms. This means that as a trader you have to set a tight stop loss order which may be taken out more easily by the cfds market. In most cases it's better to adjust to a smaller cfd trading position size in order to give your cfd trade more space for fluctuation, by setting a reasonable stop loss while at the same time reducing the risk percent per trade.

5. CFD Capital - If your cfd account is undercapitalized then you will not be able to set your stop loss orders accordingly, because you will have a large amount of your cfd trading capital invested in a single cfd trade position which will force you to set tight stop losses. If this is the case, you should start thinking seriously about whether you have enough cfd trading capital to trade the cfds trading market in the first place.

6. CFD Trading Market Trend Conditions - If the cfds trading market is trending upwards, a tight stop loss order might not be necessary. If on the other hand the cfds trading market trend is range bound and has no clear direction then you should use a tight stop loss order or not trade at all.

7. CFD Trading Chart Time Frame - the bigger the cfds trading chart timeframe you trade, the bigger the stop loss level should be. If you were a scalper cfd trader then your stop loss orders would be set tighter than if you were a cfd day trader or a cfd swing trader. This is because if you are a cfd swing trader and you determine the cfd price will move up it does not make sense to set a very tight stop loss order because if the cfds trading market swings a little your tight stop loss order will be hit.

The method of setting a stop loss order that you choose will greatly depend on what type of trader you are. The Method of how to set a stop loss order, that you choose should also follow the above guidelines, and as a trader you should apply these guideline to your CFD Method.