Techniques of Setting Stop-Loss in Gold
Traders using a xauusd system must have mathematical calculations that reveal where the trade order must be placed.
A trader also can place a stop loss according to the indicators used to set these orders. Certain indicators use mathematical equations to calculate where the stop loss order should be set and placed so as to provide an optimal and ideal market exit point. These technical indicators can be used as the basis for setting these orders.
Other traders also place these orders according to a predetermined risk reward ratio. This strategy of setting is dependent upon certain mathematical formulas. For examples a ratio of 50 pips stop loss order 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 pre determined % of their total equity balance.
To set a stoploss order order it is best to use one of the following methods:
1. Percent of XAUUSD equity balance
This is based on the percentage of trading account balance that the online 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 got a $100,000 account & is willing to risk 2% then the position size of trade that they will open for Trading will be determined by this 2% stoploss order level.
2. Setting Stop Loss using Support & Resistance Areas
Another way of setting stoploss orders is to use supports & resistance zones, on the charts.
Given that stop losses will 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 will tend to accumulate just above or below resistance or support zones, respectively.
A resistance/support zone should act like a barrier for the price movement, this is why the levels are used to set stop-losses, if this barrier is breached the price movement can move towards the in the opposite direction of original xauusd gold trade, but if this barriers (support and resistance zones) are not broken the price will continue heading in the intended direction.
Stop Loss Order level using a resistance zone
Putting order above the resistance
Stop Loss level using a support Level
Putting order below the Support Line
3. Trendlines
A trend line can be used to set stop loss orders where the trade order is set just below the trend-line. As long as the trendline holds the online trader will be able to continue to make profits while at the same time set and place this order that will lock in his profit once the trend-line is broken.
Putting order below the trend line
Examples of where to set this order using trendlines.
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