Blogs Gurutrade

    Stop Loss in Forex trading


    The trader should know that the trading on the Forex market is a variety of activities. Also, each trader should be able to know how to stop in time, because sometimes just one minute of interruption more often than not can cause the serious losses.

    It is necessary all time to be near the computer and to control the process of trading. Of course, sometimes the trader has not possibility to do this and in these instances it will be better to use the pending order, such as stop loss or take profit order.

    What is a "Stop Loss" ?

    It means that the limiting of the losses. And in the majority of cases the limit of Stop Loss is not more than 10% from the size of the margin per order. Sometimes, if the company is adapted on the newbies, the limit can be up to 15-20%. For instance, the main goal of this order is to reduce the losses of the trader.

    In spite of all advantages of the Stop Loss, not all specialists use it. The main reason of such doubt is the debate regarding the possible losses. Some specialists consider that all the deposit of the trader can be devoured by the Stop Loss. Other specialists are sure that without Stop Loss the trend is usually not unwrapping and the price is destroying the deposit. And in the first case the trader can escape the losses, if he waits till the price returns to the previous level. Finally, the trader should understand that every specialist has his own opinion on the subject of Stop Loss, but it is not a verdict.

    Either way, we can not contradict any point of view. Everyone has a possibility to work with the Stop Loss as well as without it. But in the majority of cases Stop Loss helps the trader to save his deposit.

    Several rules of the Stop Loss placing:

    Firstly, if it is the buy order, Stop Loss must be on the level lower than the opened position. And the intention is to minimize the probability of the losses.

    Secondly, if the sell order is opened, Stop Loss must be beyond the level of the opened order. And in this case the loses can be minimal, if the prices increase.

    Thirdly, Stop Loss can not be used with the Scalping strategy, because the time, spend in placing, may affect negative on the profit.

    In brief, it is important to use Stop Loss, because with the help of this instrument the trader has the opportunity to secure his deposit.

    To leave a comment you must or Join us

    By visiting our website and services, you agree to the conditions of use of cookies. Learn more
    I agree