Stop Loss XAUUSD Order Setting: Points to Remember When Setting Gold Trading StopLoss Orders

The key to setting stop losses in Gold trading is not to set too tight or too far & not exactly on the support/resistance zones.A few pips below the support or above the resistance zones are the best place to set stop loss orders.

If you're going long (buying Gold pair), just look for a nearby support level that is below your entry point and set this stop loss about 20 to 30 pips below that support zone. The example illustration below shows the level where a gold trader can set-up their stop loss orders on the XAUUSD price chart just below the support zone.

Support Level for Setting Stop Loss Level for Buy Trade on Gold Chart

If you're going short (selling XAUUSD pair), just look for a nearby resistance level that is above your entry point & set and place this order about 20 to 30 pips above that resistance zone. The example illustration below shows the level where a trader can set up their stops just above the resistance level on a Gold chart.

Resistance Level for Setting Stop Loss Level for Sell Trade on XAUUSD Trading Chart

You also can use stop loss orders to lock in profits, Not Just for Preventing Losses

The advantage of a stop loss is that you do not have to monitor on a daily basis how the Gold price chart is performing. This is especially handy when you're in a situation that stops you from monitoring your transactions for an extended period of time, or when you want to go to sleep after trading Gold the whole day, but leave that 1 XAUUSD trade open.

The disadvantage of a stop loss is that the price at which you place these orders could be activated by a shortterm fluctuation in XAUUSD price. The key is picking a stop loss order percentage that allows the Gold price to oscillate within the day to day range while preventing the down side risks.

These stoploss orders are traditionally thought of as a way to stop losses thus the title. Another use of these stop loss order orders is to lock in the profits, in which case it's known as a trailing stoploss order.

For a trailing stop loss order it is set at a % level below the current Gold market price. This trailing stoploss order level is then adjusted as the Gold trade unfolds. Using a trailing stop loss level allows you to let profits run while at the same time guarantees that should the market turn you will have locked in some of your trading profits.

These stop loss orders can also be used to eliminate risk if a XAUUSD trade becomes profitable. If a position makes some feasible gains then the stoploss order can be moved to break even point, the point at which you bought the Gold pair, therefore ensuring that even if the Gold trade position moves against you, you'll not make any loss, you'll breakeven on that XAUUSD trade.

Trailing stop loss orders are used to maximize and protect profit as the Gold price rises & limit losses when the price falls.

A good example of an indicator that can be used to set a trailing stop is when you use the parabolic SAR chart indicator & keep moving your stop loss to the parabolic SAR level.

Parabolic SAR Indicator for Setting Trailing StopLoss in XAU USD Trading

Another example is where a trader moves his stop loss by a certain number of pips after every few hours or after every one hour or after every 15 minutes depending on the Gold chart time frame that the Gold trader is using.

In the above illustration the parabolic SAR which had a setting of 2 and 0.02 was used as the trailing stoploss order level for the above chart. The trader would have kept moving the trailing stop level upward after every SAR was plotted until the moment when the Parabolic SAR was hit & the trend reversed.

Conclusion

A stop loss order is a simple tool yet so many traders & traders fail to use it. Whether it is used to reduce excessive losses or to lock in trading profits, nearly all investing methods can benefit from this trading tool.

Factors To Remember When Placing and Setting These Stop Loss Orders

Here are some important points to remember:

Be careful with the points where you set these stoploss orders. If XAUUSD Gold price generally fluctuates 50 points, you do not want to set your order too close to this range else you'll be taken out by normal market price volatility.

StopLoss orders take the emotion out of trading decisions & by setting one you set a predetermined point of exiting a losing trade position, meant to control trading losses and preserve your account equity.

XAUUSD traders can always use indicators to calculate where to place these stoploss order levels, or use the concepts of Resistance & Support levels to identify where to set these stoploss orders. Another good MT4 indicator used to set these orders is the Bollinger bands indicator where traders use the upper and lower band as the limits of price thence setting these stop loss order orders just outside these bands.

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