Trading Oil Choose a Stop Loss Oil Trading Order

How to choose you stop loss level the target stop loss should be based on various strategies depending on your type of oil trading method.

The three techniques of choosing stop loss levels are:

Strategies and Methods of Setting Stop Loss Crude Oil Trading Orders In Oil Trading

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

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

Traders also place these orders according to a predetermined risk to reward ratio. This method of setting is dependent upon certain math equations. For example 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

Other traders just use a predetermined percent of their total oil trading account balance.

To set a stop loss it's best to use one of the following techniques:

1. Percent of Crude Oil trading account balance

This stop loss setting method is based on percent of account balance that the trader is willing to risk when trading.

If a trader is willing to risk 2% of account balance then the trader decides how far he will set the stop loss oil trading order level based on the trade position size which he has bought or sold.

Example:

If a trader has a $10,000 crude oil trading account & is willing to risk 2 %

• If the trader buys 1 mini contract

  1 pip = $1

  Then setting at 2%

  2% is $ 200

2. Setting Stop Loss Oil Orders using Support & Resistance Levels

Another way of setting oil stop loss oil orders is to use supports and resistance levels, on the oil charts.

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

A resistance or a support level should act like a barrier for the crude oil price movement, this is why they are used to set stop losses, if this barrier is broken the crude oil price movement can go towards the opposite direction of the original oil trade, but if this barriers (support & resistance levels) are not broken the crude oil price will continue heading in the intended direction.

Stop Loss Oil Order Level Setting using Resistance Level

Setting stop loss oil trading order above the resistance level

Stop Loss Oil Order Level using Support Level

Setting stop loss oil trading order below the Support Level

3. Crude Oil Trendlines

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

Setting stop loss oil trading order below the oil trendline

Example of where to set this stop loss oil trading order using oil trend lines.