Stop loss strategy forex

There is no clear rule of thumb when it comes to placing stops, but there are some generally recognized approaches.

This way, if the market suddenly breaks the trend that prompted you to initiate the trade and then moves far enough in the losing direction, your account is protected because your position is closed automatically by the stop-loss order.

If your trading style is more of a swing trading style , you might set your stop loss farther into loss territory -- perhaps two to three times greater than the average daily trading range.

Remember, the point of the stop loss is to end the trade when the market goes far enough in the opposite direction that a return to profitability seems unlikely.

Advanced strategy #10 (Trend Line Trading Strategy) | Forex Strategies & Systems Revealed

Faced with a loss, you may find it difficult to face the fact that you made the wrong decision. Setting the stop when you enter the trade can help you to draw that line in the sand that protects you from an even greater loss. Ir rarely pays off.

Advanced system #19 (IKH-HA Strategy) | Forex Strategies & Systems Revealed

If you move your stop to avoid taking the loss, you are defeating its protective purpose. Harvesting Stops and multiple stops. Among forex traders there is a belief -- rarely matching reality -- that if you set a stop, your market maker may manipulate the market in order to "harvest" your stop and claim the profit from your loss.

4 Types Of Stop Losses - irexapezoren.web.fc2.com

Realistically, however, few traders -- probably almost no individual traders -- make trades large enough to make such a move worthwhile even if your market maker had no qualms about engaging in the practice. For other reasons, however, it can be a good idea to set multiple stops. A sudden but limited move away from your trade position may take out your first stop or even your second, but if the market then reverses, some portion of your trade will still be active.

The stop and reverse stop loss strategy includes a stop at a certain loss point and simultaneously enters a new trade with a stop in the opposite direction. Using this strategy requires more market savvy than beginning traders can be expected to possess.

Also, not all brokers accept this particular trade as a single order. In those cases, once the first stop is executed, you will need to execute a new order one that is "the reverse" of the original order and enter the new stop in this new direction.

This strategy addresses the trading maxim, 'Let Your Profits Run, and Cut Your Losses Short. As the name suggests, a trailing stop trails behind the market price by a fixed amount. If your trade is moving into profit, the trailing stop moves upward with the rising market price.

In this way, the percentage of loss you are willing to tolerate remains about the same as the market moves in your favor. If the market eventually moves against you, the trailing stop, having moved upward as you profited, protects you from a market move that wipes out the profit.

Search the site GO. Forex Trading Basics Risk Management Getting Started Fundamental Analysis Technical Analysis Advanced Trading Forex FAQs. Updated August 15, Get Daily Money Tips to Your Inbox Email Address Sign Up.

The Stop-Loss Order - Make Sure You Use It

There was an error. Please enter a valid email address. Personal Finance Money Hacks Your Career Small Business Investing About Us Advertise Terms of Use Privacy Policy Careers Contact.