Methods of Setting Stop Loss XAUUSD Orders in Gold Trading

Traders using a XAUUSDtrade system must have mathematical calculations that reveal where their stop loss must be placed.

A XAUUSD trader also can place a stop loss according to the technical indicators used to set these stop losses. Certain technical indicators use mathematical calculations to calculate where the stop loss orders should be set so as to provide an optimal exit point when trading Gold. These chart indicators can be used as the basis for setting these stop loss orders.

Other online Gold traders also place these stop loss orders according to a predetermined risk to reward ratio. This method of setting these orders is dependent upon certain mathematical calculations based on Gold chart price movements. For example a ratio of 50 pips stop loss order can be used by a gold trader if the trade has the potential to make 100 pips in profit: this is a risk reward ratio of 2:1. Also, a ratio of 30 pips stop loss order can be used by a gold trader if the trade has potential to earn 90 pips in profit: this is a risk : reward ratio of 3:1

Other traders just use a predetermined percentage% of their total trading equity balance.

To set a stop loss it's best to use one of the following methods:

1. Percentage of trading equity balance

This method is based on the percentage% of the trading account balance that the trader is willing to risk on any one single Gold trade. If a trader is willing to risk 2% of their trading account balance - then the trader determines how far he will set the stop loss order level based on the position size that he has bought or sold.

Example:

If a trader has a $100,000 account & is willing to risk 2 %

If the trader buys 5 contracts

1 pip = $5 dollars

Then setting at 2 %

2 % is $2,000 dollars

2000 /5 = 400 pips

Stop loss = 400 pips

If the trader buys 10 contracts

1 pip = $10 dollars

Then setting the stop at 2 %

2 % is $2,000

2000 /10 = 200 pips

Stoploss = 200 pips

If the trader buys 20 contracts

1 pip = $20

Then setting at 2 %

2 % is $2,000

2000 /20 = 100 pips

Stoploss = 100 pips

2. Setting Stop Loss using Support and Resistance Areas

Another way of setting stop losses is to use supports and resistance zones, on the Gold trading charts.

Given that stop losses tend to congregate at key points, when one of these support or resistance zones is tested by the price, other orders are set off, like dominos. Stoploss orders tend to accumulate just above or below the resistance or support zones, respectively.

A resistance or support zone should be like a barrier for Gold price movement, this is why the levels are used to set stop loss orders, if this barrier is broken then the Gold price movement can move towards the opposite market direction of the original Gold price trend, but if this barriers (support and resistance zones) aren't broken, then the Gold price will continue heading in the intended direction.

StopLoss Setting using a Resistance Area

Methods of Setting XAUUSD Trading Stop Loss Orders in Gold Trading - How to Set Gold Trading Stop Loss Orders

Setting StopLoss Orders above the Resistance Area

Stop Loss Setting using a Support Area

Methods of How to Set XAUUSD Stop Loss Orders in Gold Trading - Setting Gold Trading Stop Loss Orders

Setting StopLoss Orders below the Support Area

3. Setting Stop Losses Using Trend Lines

A trend line can be used to set stop loss orders where the trade order is set just below the trendline in an upwards trend & above the trend line in a downward trend. As long as the trend line holds then a xauusd trader will be able to continue making profits while at the same time setting this stop loss order that will lock his profit once the trendline is broken.

Methods of Setting Gold Stop Loss Orders in XAUUSD Trading - XAUUSD Trading Stop Loss Orders Setting

Setting the stop loss order below the Gold price trend line

Example of where to set this stop loss order using trendlines in an upwards trending Gold market.

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