StopLoss Order Example XAUUSD

Stop Loss Order Definition

Stop Loss Order is a type of order that is placed after opening a trade that is meant to minimize losses if the market trend goes against you.

Stop Loss Order is a pre-determined point of getting out of a losing trade & it is meant to control losses in xauusd.

A stop loss is an order set with your broker that will automatically close your open trade when price of your open trade order reaches a predetermined price. When set level is reached, your open trade is liquidated.

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

For example, a trader may open a buy trade and put a stop loss of 20 pips, if the price moves against the trader by 20 pips the stop loss order will be filled & the trade will be liquidated therefore limiting the loss to 20 points (pips) - Stop Loss Order Meaning.

Regardless of what you might be told by other traders, there's no question about whether these stop losses should or should not be used - xauusd stop losses should always be used.

One of most advanced things in gold is setting these stop losses - XAUUSD Stop Loss Definition - StopLoss Order Example XAUUSD. Put the stop-loss too close to your entry price & you are liable to exit the trade due to random volatility. Place the stoploss order too far away and if you are on wrong side of the trend, then a small loss could turn into a large trading loss.

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

Skeptics also will argue that in setting stop losses you are vulnerable to exit a trade just before the market moves in your favor. Most traders have had the experience of setting a these stop losses & then seeing the price retrace to that stop loss order level, or just below it, & then go in direction of their original market trend analysis. What might have been a profitable trade instead turns into a trading loss.

Experienced traders always use stop losses as these orders are an important part of discipline required to succeed in xauusd because stop loss orders can prevent a small loss from becoming a big trading loss. What's more, by diligently setting these stoploss orders whenever you enter a trade position, you end up making this important decision at the point in time when you're most objective about what's really happening with market, this is because most objective analysis is done before opening a trade transaction. After entering market a trader tends to interpret the market differently because they are biased towards one side of market, the direction of their trading analysis - StopLoss Order Example XAUUSD.

Unexpected xauusd trading economic news can come out of the blue & dramatically affect the price: this is why it is so important to have a stoploss order set for your open trade. It is best to cut trade losses early when a trade transaction is moving against you, it is best to cut your trading losses immediately rather than waiting for the loss to become a large one. Again, if you set your stop losses when you are entering a trade, then that is when you are most objective as a trader - XAUUSD StopLoss Order Meaning.

StopLoss Order Example Gold

A key trade question is exactly where to set this stop-loss order. In other words, how far should you set this stop-loss below your purchase price? Many traders will tell you to set predetermined - max acceptable loss per trade, an amount depending on your equity balance rather than use indicators for calculating where to place the stop-loss - StopLoss Order Example XAUUSD.

Professional money managers advice that you shouldn't lose more than 2 % of your account equity on 1 single trade. If you have $10,000 in capital, then that would mean that the maximum loss you should set for any one trade is $200 - XAUUSD StopLoss Order Meaning.

If you open a trade then that would mean you would limit your risk to no more than $200 for that particular trade. In which case you'd set your stop loss order at 200 or the equal number of pips based on your trade position size of trade that you as a trader have opened - Stop Loss Order Meaning - Stop Loss Order Management - XAUUSD Money Management. The topic of xauusd trading risk management is a wide topic & it is covered under learn money management topics.

• Trade Equity Management Tutorial - Parameters to Consider When Placing Stop-Loss Orders
• XAUUSD Money Management Strategies - Stop Loss Order Meaning - Stop Loss Order Management - Trade Equity Management

Stop Loss Order Definition

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

Since there aren't any rules cast in stone as to where you should put these stoploss orders on a chart, we follow general stoploss order setting guide-lines used to help place these stop losses correctly.

Some of general stop loss order setting rules used are:

1. Risk Percentage - How much is a trader willing to lose on a single transaction. General stoploss order setting rule is that a trader should never lose more than 2 percent of the total account equity on any 1 single trade transaction.

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

3. XAUUSD Risk-to-Reward Ratio - this is the measure of potential risk to reward calculated before opening a trade. If the market conditions are favorable then it is possible to comfortably give your trade more room. However, if the market is too range bound it then becomes too risky to open a trade without a tight stop loss - then do not make the trade at all. The risk to reward isn't in your favor & even setting tight stop loss orders will not guarantee profitable trading results. It would be wiser to search for a better trade to next time.

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

5. Account Capital - If your trading account is under-capitalized then you'll not be able to set your stop loss orders accordingly, because you will have a large amount of money invested in a single trade position which will force you to set very tight stoploss orders. If this is case, you should consider seriously about if you have enough capital to trade XAUUSD in the first place.

6. Trade Market Conditions - If price is trending up-wards, a tight stop may not be necessary. If on the other hand the price is choppy & has no clear trend direction then you should use a tight stoploss or not open any transactions at all.

7. Chart Time-Frame - the bigger the chart timeframe you use, the bigger the stop loss level should be. If you were a scalper trader your stop loss orders would be tighter than if you were a day trader or a swing trader. This is because if you are using longer chart time frames & you determine the price will be move up-wards it doesn't make sense to set a very tight stoploss because if the price swings just a little, your open order will be hit.

StopLoss Order Example Gold

The technique of setting stop loss orders that you choose will greatly depend on what type of trader you are. Most oftenly used method to determine where to set stop losses is - resistance and support levels. These support & resistance zones give good points for setting these stop losses as they are most reliable levels to set stop loss orders, because the support & resistance zones will not be hit many times.

Stop Loss Order Definition

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

XAUUSD Stop Loss Definition - StopLoss Order Example Gold - Stop Loss Order Meaning - Stop Loss Order Meaning - Stop Loss Order Management - XAUUSD Money Management