Placing Stop-Loss Formula
Stop Loss Example PDF
Stop Loss Order is a type of order which is set after opening a trade that's intended to cut losses if the market goes against you in the opposite direction.
Stop Loss is a pre-determined point of getting out of a losing trade & it's meant to control losses in xauusd.
A stop loss is an order placed with your broker which will automatically close your open trade when the price of your open trade order reaches a pre-determined price. When set level is reached, your open trade is closed out.
These orders aim to restrict the sum of funds that trader can lose: by closing trade if a particular price that is against the trade is reached.
For example, one may open a buy trade & 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 loss to 20 points (pips) - Stop Loss Order Calculator XAUUSD.
Regardless of what you may be told by other traders, there's no question about whether these stop loss orders should or should not be used - stop loss orders should always be implemented.
One of most trouble some things in xauusd trading is setting these stoploss orders - Stop Loss Order - Setting Stop-Loss Order Formula. Put the stop-loss too close to your entry price & you're liable to exit the trade due to random volatility. Place the stoploss order too far away & if you're on the wrong side of the market trend, then a small loss could turn in to a big loss.
Critics 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 stoploss orders 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 and then seeing the price retrace to that stoploss level, or just below it, & then go in the direction of their original market trend analysis. What might have been a profitable trade instead turns into a loss.
Experienced traders always use stop losses as these orders are an important part of the discipline required to succeed in gold because stoploss orders can prevent a small loss from becoming a large loss. What's more, by purposefully placing these stoploss orders whenever you enter a trade position, you end up making this important decision at point in time when you are most objective about what is really happening with market, this is because most objective analysis is done before opening a trade transaction. After entering market a trader will tend to analyze the market differently because they have a bias towards one side of market, the direction of their analysis - Setting Stop-Loss Formula.
Unexpected xauusd economic news can come out of the blue & dramatically affect the price: this is why it's so important to have a stoploss order set for your open trade. It is best to cut trade losses early when a trade is moving against you, it's best to cut your 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 - Stop-Loss Order.
Placing Stop-Loss Formula
A key trade question is precisely where to place this stop loss order. In other words, how far should you place this stop loss below your purchase price? Many traders will tell you to set pre-determined - maximum acceptable loss per trade, an amount depending on your account equity balance rather than use technical indicators for calculating where to place the stop-loss - Setting SL Order Formula.
Professional money managers advice that you shouldn't lose more than 2% of your account equity on any 1 single trade. If you have $10,000 in capital, then that would mean the maximum loss you should set for any one trade is $200 - Stop Loss Order.
If you open a trade then that would mean that you would limit your risk to no more than $200 for that specific trade. In which case you'd set your stop-loss at 200 or the equal number of pips based on your trade position size of trade that you've opened - Stop-Loss Order Examples Course Tutorial - Stop-Loss Order Calculator Excel. The topic of xauusd risk management is a wide topic & it's discussed under learn money management tutorials.
- XAUUSD Equity Management Tutorial - Factors to Consider When Setting Stop-Loss Orders
- XAUUSD Equity Management Strategies Methods - Stop Loss Order Examples Course Tutorial - Stop-Loss Order Calculator Excel
Factors to Consider When Setting Stop-Loss Orders
The most important question is how close or far this stoploss order should be set from the price where you entered the trade. Where you set the stop-loss will depend on several factors:
Since there are not any rules cast in stone as to where you should set these stop losses on a chart, we follow general stoploss order setting guide-lines used to help place these stop loss gold trading orders in the correct way.
Some of general stop-loss setting guide-lines used are:
1. Risk Percentage - How much is one willing to lose on one trade. 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 trade.
2. Market Volatility - market volatility refers to the daily price range movement of instrument that you are trading. If gold routinely moves upwards and down in a range of 50 pips or more over the course of the 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 normal market volatility.
3. XAUUSD Risk-Reward Ratio - this is the measure of potential risk : reward calculated before opening a trade transaction. 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 risky to open a trade without a tight stoploss - then do not make the trade at all. The 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 search for a better trade to next time.
4. Trade Position Size - if the trading size executed 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 stop-loss for your trade which may be taken out more easily. In most cases it's better to adjust to a smaller trade size so as to give your trade more space for fluctuation, by setting a reasonable stop loss level for this stop loss order while at same time reducing the risk for the trade.
5. Account Capital - If your trading account is under-capitalized then you won't be able to set your stop losses accordingly, because you'll have a large amount of money invested in a single trade which will force you to set very tight stoploss orders. If this is the case, you should think seriously about whether you have enough capital to trade XAUUSD in the first place.
6. Market Conditions - If the price is trending upwards, a tight stop may not be necessary. If on the other hand the price is choppy and has no clear trend direction then you should use a tight stop loss or not open any transactions at all.
7. Timeframe - the bigger the chart timeframe you use, the bigger the stop loss level should be. If you were a scalper trader your stop losses would be tighter than if you were a day trader or a swing trader. This is because if you're using longer chart time-frames & you determine the price will be move up it doesn't make sense to set a very tight stoploss order because if the price swings just a little, your open order will be hit.
Placing Stop-Loss Formula
The technique of setting stop loss orders that you select will mostly depend on what type of trader you are. Most common used method to determine where to set stop loss orders is - resistance & support levels. These support & resistance areas give good points for setting these stop loss orders as they're most reliable levels to set stop loss orders, because the support and resistance zones won't be hit many times.
Stop Loss Example PDF
The technique of how to set these stop loss orders that you select should also follow the stop loss order setting guidelines above, even if not all these rules apply to your trading strategy try to implement the guide-lines which will apply to your trade strategy depending on what type of trader you are.
Stop Loss Order - Setting Stop-Loss Order Formula - Stop Loss Order Calculator XAUUSD Trading - Stop Loss Order Examples Course Tutorial - Stop-Loss Order Calculator Excel
