Methods of Setting Stop Loss Orders in Gold

Traders using a xauusd system must have mathematical calculations that reveal where the order must be placed.

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

Other traders also place these orders according to a predetermined risk to reward ratio. This strategy of setting is dependent upon certain mathematical equations. For examples a ratio of 50 pips stop loss can be used by a trader if the trade has potential to make 100 pips in profit: this is a risk : reward ratio of 2:1

Others just use a predetermined percentage of their total account balance.

To set a stop loss order it is best to use one of the following methods:

1. Percent of XAUUSD account balance

This is based on the percent of account balance that the trader is willing to risk.

If one is willing to risk 2% of account balance then the trader decides how far he will set the order level based on the trade position size that he has bought or sold.

Example:

If a trader has a $100,000 account & is willing to risk 2% then the position size of the trade that they will open for Trading will be determined by this 2% stop loss level.

2. Setting Stop Loss Order using Support and Resistance Levels

Another way of setting stoploss orders is to use supports & resistance zones, on the charts.

Given that stop losses tend to congregate at key points, when one of these levels is touched by the price, others are set off, like dominos. Stop loss orders tend to accumulate just above or below resistance or support levels, respectively.

A resistance or a support level should act like a barrier for price movement, this is why they are used to set stop losses, if this barrier is broken the price movement can go towards the opposite direction of the original xauusd trade, but if this barriers (support and resistance zones) aren't broken the price will continue moving in the intended direction.

Stop Loss Order level using a resistance zone

Setting order above the resistance

Stop Loss Order level using a support Level

Setting order below the Support Line

3. Trend Lines

A trend line can be used to set stop losses where the order is set just below the trend line. As long as the trend line holds the trader will be able to continue making profits while at the same time set this order which will lock his profit once the trendline is broken.

Setting order below the trend line

Examples of where to set this order using trend lines.