How to Place Stop Loss Commodity Trading Order in Commodities Trading

How to Put Stop Loss Commodity Order

Stop Loss Commodity Order is a type of order that's placed after opening a commodity trade that is meant to cut losses if the commodity market trend moves against you.

Stop Loss Commodity Order is a predetermined point of exiting a losing commodity trade & it is meant to control losses in commodities trading.

A stop loss order is an order placed with your commodity broker which will automatically close your open commodity trade when price of your open trade order reaches a pre-determined commodity price. When set level is reached, your open trade is liquidated.

These commodity orders are designed to limit the amount of money that trader can lose: by exiting the commodity trade if a particular commodity price that's against the trade is reached.

For example, a trader might open a buy commodity trade and put a stop loss of 20 pips, if the commodity trading price moves against the trader by 20 pips the stop loss order will be filled & the trade will be liquidated therefore limiting loss to 20 points (pips) - How to Place Stop Loss Commodity Trading Orders Examples.

Regardless of what you may be told by other commodities traders, there is no question about whether these stop-loss orders should or should not be used - stop-loss orders should always be used.

One of the most difficult things in commodity trading is setting these stop loss orders - How to Calculate Stop Loss Commodity Order - How to Place Stop Loss Commodity Trading Order. Put the stop loss order too close to your entry price & you're liable to exit the commodity trade due to random market volatility. Place the stop-loss order too far away & if you are on the wrong side of the commodity trend, then a small loss could turn into a big trading loss.

Critics will point out several disadvantages of these stop-loss orders: that by placing them you are guaranteeing that if should your open commodity trade position move in the wrong direction, you will end up selling at lower commodity prices, not higher.

The skeptics will also argue that in setting commodity stoploss orders you're vulnerable to exit a commodity trade just before the commodity market moves in your favor. Most traders have had the experience of setting a these stop-loss orders and then seeing the commodity trading price retrace to that stop-loss order level, or just below it, & then go in the direction of their original commodity market trend analysis. What may have been a profitable commodity trade position instead turns into a commodity trading loss.

Experienced commodity traders always use stop loss orders as these orders are an important part of discipline required to succeed in commodity trading because stop-loss orders can prevent a small trading loss from becoming a large trading loss. What's more, by diligently setting these stop-loss orders whenever you enter a commodity trade position, you end up making this important decision at point in time when you are most objective about what is really happening with commodity market, this is because the most objective commodity technical analysis is done before opening a commodity trade. After entering the commodity market a trader will tend to interpret the commodities trading market differently because they have a bias toward one side of the commodities trading market, the direction of their commodity analysis - How to Place Stop Loss Commodity Trading Order.

Unexpected commodity economic news can come out of the blue and dramatically affect the commodity price: this is why it is so important to have a stop-loss order set for your open commodity trade. It is best to cut commodity losses early when a commodity trade position is going against you, it's best to cut your commodity losses immediately rather than waiting for the loss to become a big one. Again, if you set your stop-loss orders when you're entering a trade, then that is when you're most objective as a trader - How to Calculate Stop Loss Commodity Trading Order for Commodity Trading.

How to Place Stop Loss Commodities Trading Order in Commodity Trading

A key commodity question is exactly where to place a this commodity stop loss order. In other words, how far should you place this commodity stop loss below your purchase commodity price? Many commodity traders will tell you to set pre-determined - maximum acceptable loss per commodity trade, an amount based on your commodity trading account balance rather than use commodity technical indicators for calculating where to place the stop loss order - How to Place Stop Loss Commodity Trading Order.

Professional money managers advice that you should not lose more than 2% of your commodity trading account equity on any one single commodity trade. If you have $10,000 in commodity capital, then that would mean the maximum loss you should set for any one commodity trade is $200 - How to Calculate Stop Loss Commodity Trading Order for Commodity Trading.

If you opened a commodity trade then that would mean that you would limit your risk to no more than $200 for that specific commodity trade. In which case you would set your stop-loss order at 200 or the equivalent number of pips based on your commodity position size of the commodity trade that you've opened - How to Put Stop Loss Commodity Trading Order in Commodities Market - How to Put Stop-Loss Commodity Trading Order. The topic of commodity risk management is a wide topic & it is covered under learn commodity money management trading topics.

• Commodities Trading Money Management Introduction - Factors to Consider When Setting StopLoss Commodity Trading Orders
• Commodities Trading Money Management Methods - How to Put Stop Loss Commodity Trading Order in Commodities Market - How to Put Stop-Loss Commodity Trading Order

How to Put Stop Loss Commodities Order

The most important question is how close or far this stoploss order should be set from the commodity trading price where you entered the commodity trade. Where you set the stop-loss commodity trade order will depend on several factors:

Since there are no rules cast in stone as to where you should set these stop-loss orders on a commodity chart, we follow general stop-loss order setting guide lines used to help place these commodity stop loss trading orders correctly.

Some of the general stop loss commodity trade order setting tutorials used are:

1. Risk Percentage - How much is a trader willing to lose on a single commodity trade transaction. The general commodity stop loss trading order setting rule is that a trader should never lose more than 2 percent of the total commodity trading account capital on any single commodity trade transaction.

2. Commodities Market Volatility - commodity market volatility refers to the daily commodity trading price range movement of the commodity instrument that you are trading. If a commodity instrument routinely moves up and down in a range of 50 pips or more over course of the day, then you cannot set a tight stop-loss when you open a commodity trade. If you do, you'll be taken out of the commodity trade position by the normal commodity market volatility.

3. Commodity Trading Risk:Reward Ratio - this is measure of potential risk : reward calculated before opening a commodity trade. If the commodity market conditions are favorable then it's possible to comfortably give your commodity trade more room. However, if the commodities market is too choppy it then becomes too risky to open a commodity trade transaction without a tight stop-loss - then don't make the commodity trade at all. The commodity trading risk to reward ratio is not in your favor and even setting tight stop-loss orders won't guarantee profitable results. It would be wiser to look for a better commodity trade position to next time.

4. Commodity Trade Position Size - if the commodity trade size opened is too big then even the smallest decimal commodity trading price movement will be fairly big in risk percentage terms. This means that you have to set a tight stop-loss for your commodity trade which might be taken out more easily. In most cases it's better to adjust to a smaller commodity trade position size so as to give your commodity trade more space for fluctuation, by setting a reasonable commodity stop-loss level for this stop-loss order while at same time reducing the commodity risk for the commodity trade.

5. Commodity Account Capital - If your commodities account is under-capitalized then you will not be able to set your commodity stop-loss orders accordingly, because as an investor you'll have a large amount of money that is invested in one single commodity trade which will force you to set very tight commodity stop loss trading orders. If this is case, you should think seriously about whether you've enough capital to trade Commodities Trading in the first place.

6. Commodities Trading Market Conditions - If commodity trading price is trending upward, a tight stop might not be necessary. If on the other hand the commodity trading price is choppy & has no clear commodity trend direction then you should use a tight stop-loss or not open any commodities trades at all.

7. Commodity Trading Chart Time frame - the bigger the commodities chart timeframe you use, the bigger the stoploss order level should be. If you were a scalper commodity trader your commodity stoploss orders would be tighter than if you were a commodity day trader or a commodity swing trader. This is because if you are using longer commodities chart timeframes and you determine commodity trading price will be move up it doesn't make sense to set a very tight stop because if the commodity trading price swings a little your open commodity order will be hit.

How to Place Stop Loss Commodity Trading Order in Commodities Trading

The method of setting commodity SL stop loss orders that you select will greatly depend on what type of trader you are. Most commonly used technique to determine where to set commodity stop loss orders is - resistance and support levels. These commodity support & resistance areas give good points for setting these stop-loss orders as they are most reliable levels to set stop-loss orders, because the support & resistance levels won't be hit many times.

How to Put Stop Loss Commodity Trading Order

The technique of how to set these commodity stop-loss trading orders that you choose also should follow the commodity stop-loss trading order setting guide lines above, even if not all these guidelines apply to your commodity strategy try to implement the guide-lines that will apply to your commodity strategy depending on what type of trader you are.

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