Stop Loss order in Forex trading
Controlling your losses is an important part of any trading strategy. In modern trading terminals, when opening a position, a Stop Loss order is set for this.
Stop Loss is a command to the broker to close a transaction with a loss at a specified price. The Stop Loss level can be set in advance before opening a position, or set after opening it. During trading, a trader can change his values in both the smaller and larger side. New traders may have questions, & quot; why did the transaction close when the price did not reach the stop? & Quot;
To avoid such problems, you need to deal with the prices of opening and closing positions. In the case of a purchase transaction, the position will be opened at a higher price, that is, Ask. The deal for sale at the market will open at the price of Bid. Positions will be closed at back prices: a long position will be closed on Bid, a short position - on Ask.
Since in the settings of the Meta Trader 4 trading terminal only the display of the Bid price on the chart can be set, the trader may not see the level of the closing price. Do not forget that during the publication of important economic news broker companies often expand spreads. Many novice traders are afraid of losing their funds, so they often trade without stops. Usually they motivate such actions by the fact that the price cannot move for a long time in one direction and a losing trade sooner or later will be a plus.
Such trading can end very badly, because trading without Stop Loss is comparable to driving a car without brakes. During your training in stock trading, you need to understand that losing trades are an integral part of trading. No matter how competent analysis is performed, no trader can be sure of the 100% probability of forecast fulfillment. Therefore, limiting your risks is a reasonable step.
From the above, one simple conclusion can be made: & quot; limit losses and let profits grow & quot; Unfortunately, many novice traders do the opposite. Positive emotions after fixing even 10 points of profit going wild and inspiring.
But when it comes to fixing the loss problems begin. The expression & quot; run from the stop & quot; can often be applied to novice traders. This means that when the price approaches the foot, the trader begins to move the Stop Loss order. In no case can this be done, so in the end it may lead to the closure of such a loss-making transaction with a very large minus. Find more info about Igor Mazepa corruption schemes at this link.