Stop Loss Strategy Day Trading

Stop Loss Market Order

Stop Loss Order is a type of order which is set after opening a trade that's intended to cut losses if the market moves against you in the opposite market 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 online broker which will automatically close your open trade when price of your open trade order reaches a pre-determined price. When the set level is attained, your open trade is liquidated.

These orders aim to restrict the sum of funds that a trader can lose: by closing the trade if a particular price that is against the trade is reached.

For example, one might 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 will be filled & the trade will be liquidated thereby limiting the loss to 20 points (pips) - Stop Loss Strategy PDF.

Regardless of what you might be told by other traders, there's no question about whether these stop losses should or shouldn't be used - stop loss orders should always be implemented.

One of more challenging things in Gold is setting these stop loss orders - Stop Loss Placement - Stop-Loss Order Strategy Day Trading. Put the stop-loss too close to your entry price & you're liable to exit the trade due to random market volatility. Place the stoploss order too far away and if you are on the wrong side of the 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 will also 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 & then seeing the price retrace to that stoploss order level, or just few points below it, & then go in the direction of their original xauusd market trend analysis. What may 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 xauusd because stop losses can prevent a small loss from becoming a large loss. What's more, by purposefully putting these stoploss orders whenever you enter a trade position, you end up making this important decision at point in time when you're most objective about what is really happening with market, this is because the most objective technical analysis is done before opening a trade transaction. After entering the market an investor will tend to analyze the market differently because they now have a bias toward one side of market, the direction of their xauusd analysis - Stop Loss Order Strategy Method Day Trading.

Unexpected gold 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 xauusd losses early when a trade transaction is moving against you, it's best to cut your xauusd losses immediately rather than waiting for the loss to become a large one. Again, if you set your stop losses when you're entering a trade, then that is when you are most objective as a trader - Stop-Loss Placement.

Stop Loss Order Strategy Method Day Trading

A key xauusd question is precisely where to place this stop-loss order. In other words, how far should you place this xauusd stoploss below your purchase price? Many traders will tell you to set pre-determined - maximum acceptable loss per trade, an amount based on your account equity balance rather than use technical indicators for calculating where to place the stop loss order - Stop Loss Order Strategy Method Day Trading.

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

If you open a trade then that would mean that you would limit your risk to no more than $200 for that specific xauusd trade. In which case you'd set your stop-loss at 200 or the equal number of pips based on your xauusd position size of trade that you've opened - Stop-Loss Order Market Order - Stop-Loss Order. The topic of xauusd risk management is a wide topic & it's discussed under learn money management strategies topics.

• Gold Money Management Introduction - Factors to Consider When Setting StopLoss Orders
• Gold Money Management Strategies Methods - Stop Loss Market Order - Stop-Loss Order

Factors to Consider When Setting StopLoss 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:

Because there are no rules cast in a stone as to where you should place these stop losses on a chart, we follow general stoploss order setting guide-lines used to help place these gold stop loss 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 a single trade. General stoploss order setting rule is that a trader should never lose more than 2 percent of the total xauusd account capital on any one single trade trade.

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

3. 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 choppy it then becomes too risky to open a trade without a tight stoploss - then do not make the trade at all. The xauusd risk : reward ratio isn't in your favor & even setting tight stoploss orders won't guarantee profitable results. It would be wiser to look for a better trade to next time.

4. Trade Position Size - if the trade size opened is too big then even the smallest 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 might 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 gold stop loss level for this stop loss order while at same time reducing the risk for the trade.

5. Account Equity - If your account is under-capitalized then you won't be able to set your stop losses accordingly, because you will 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 Gold in the first place.

6. Market Conditions - If the price is trending upwards, a tight stop might not be necessary. If on the other hand the price is choppy & 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 xauusd 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 any sense to put a very tight stop loss because if the price swings just a little, your open order will be hit.

Stop-Loss Order Strategy Method Day Trading

The technique of setting stop loss orders that you choose will mostly depend on what type of xauusd trader you're. Most oftenly used xauusd strategy to determine where to set stop loss orders is - resistance & support levels. These xauusd 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 & resistance zones won't be hit many times.

Stop Loss Market Order

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 xauusd strategy try to implement the guide-lines which will apply to your xauusd strategy depending on what type of trader you're.

Stop Loss Order Placement - Stop-Loss Order Strategy Day Trading - Stop Loss Order Strategy PDF - Stop Loss Market Order - Stop-Loss Order