Forex Trading – Setting The Stop Loss

It is important that all traders use stop losses because it helps to protect their capital in case the trade does not go in their favor. Clicking Here will teach you the best ways to keep stop losses.

 

The resistance level can be used to place a stop when you are in a short position. The best way to place stop loss is to place it above the resistance level. To leave some room for the price to move to keep at least one ATR level from the resistance line over which you place the stop loss.

The support level can be used to place stop loss when you are in a long position. The stop loss should be placed below the support level and to leave some room for the price to move it is advised that you leave at least one ATR distance from the support level to place the stop loss.

Money management

It is a normal mentality to focus just on the profits when trading in the Forex market. Forex is the most liquid as well as the largest market and this is indeed lucrative. The Forex market lets you make some huge profits. But to be successful you also need to pay attention to the risk that is associated with each trade. Every trade that you take in Forex has a chance of going wrong and this is why money management is crucial. Having a stop loss in place helps you to manage the risk. Without using proper risk management you will not be able to see your capital grow.

Use stop loss to protect your trades

The Forex trading platforms let you place a stop loss on your trades. It is never advised to be in a position without a protective stop loss. No trade in the market assures you 100% success and if you want to protect your trading capital from the volatility in the market then you have to keep a stop loss on every trade that you take. The stop-loss protects your capital in case the market starts to move in the direction that you did not want it to.

The Forex traders use many strategies to place a stop loss on the trades. Some traders will just use a simple pip count method. Like for example, a trader will get out of the trade if he loses more than say 50 pips on a trade. Other traders will place a stop loss based on their account size. Here a trader will not lose more than say 2% on every trade that he takes.