Orders Stop Loss and Its Use
There is a tool that every trader should know how to use to control the damage that can accept a transaction. It’s called stop loss order or stop loss (SL). It is an automated system for the operator to enter after opening a new position.
This command tells the a priori investor or broker when you exit the market. You can enter this value usually as a percentage of points (PIP) or dollar value. The stop-loss orders are a must for every investor in forex. This type of order to avoid losing all the capital in a couple of transactions. They are also very important as a guide for planning your risk-profit ratio. Therefore, the main advantage is that they establish the maximum amount of loss that a forex investor is willing to absorb in one position, without compromising the entire capital or greater risk as established by our strategy.
However, the main disadvantage is that if such orders are not placed at appropriate levels, it may be that investors are removed from positions ahead of time or even just when the market was about to revert to a profitable position. So, in this situation, we the following question arises: How to place a stop loss order? The answer is you, is, that only depend on the investor. I think so because not everyone has the same size or the same strategy, as the administration of our money is handled very differently, and remember that psychology plays an important role. But even so, there are general guidelines that have proven quite useful and effective can help us in the manner in which orders should be placed SL.
Then we will study three different ways of how to place your stop loss order. 1. Most investors are going to set a percentage of your account as an acceptable loss. So if you have $ 10,000 in your account and you never want to lose more than 5% in a particular line, the maximum loss should be $ 500. It’s step one. We must determine what will be our share of risk, should preferably be 1%, but if you have confidence in their strategy may increase the risk to 3% and 5% extreme case. For example: If in our account we have $ 10,000, our risk represented 3% = $ 300.
Therefore, one should adjust your stop loss order in so you never lose more than $ 300 per transaction or 30 pips. (Assuming this is a normal account where each pip is approximately equivalent to 1 U.S. $ 0) 30 pips = $ 300 in a regular account where 1 pip = $ 10 300 Pips = USD $ 300 on a mini account where 1 Pip = USD $ 1 300 pips = $ 300 in a mini account where 1 pip = $ 1, but divided into 3 lots of 100 pips each. The size of your operation should be adjusted so that the risk is 3% of total operated lots. 2. If we decide to enter the market as short-term we must respect the day of departure. That is, respect the stop loss order.
This means you must close before the “deadline” or will become a very unpredictable position (because the market is very different from what it was at the time they have entered into this position). After taking the initial position and the output is ordered, you must follow market events and technical indicators to adjust its output orders. The most important rule is to enhance the gain / loss over time limit. Usually, if I take a medium term position (2-4 days) attempts to reduce the stop and target of 10-25 pips every day. also monitor global events, to stop having major losses when the news can hurt my position. If the benefit is quite high, I try to move my stop loss order at the entry point, making it a sure gain position. The idea here is to find a balance between greed and caution.
But as your position gets older the profit should be more limited and losses cut. In addition, the investor should always remember that if the market suddenly began to act, should be even more cautious. 3. We use a very key indicator is not accurate, but is very accurate: Fibonacci, which helps us to calculate when you can retract the market. By using Fibonacci to place your order lost in any case be used: for example, the case of USD / JPY is 98.69 to 99.75 motion.
This gave us three levels where the market may retract 99.10 (38.2%), 99.22 (50%) and 99.34 (61.8%). In this example, the investor entered the market a little ahead of 38.2% in 99.13 and placed his order at 98.94 SL just below 23.6%. The operator could easily have used a few pips below the Fibonacci line instead of the exact price to avoid market noise or locks us out and then move into profitability. The problem at each point is that each agent has the same capacity . If you have an account you can tolerate the risk margin is better not to enter into the transaction.No matter how beneficial is the transaction, how much money you can do, how likely is that the market is moving in the direction you want? Should consider whether you have enough money to operate in the market.
The three methods discussed in this lesson are all ways to place a stop loss order, but are most common. The question you are probably asking now is what method is best. Well, there is no right answer to this depends on many factors, such as personal preferences, the size of your account and you have as a test strategy for optimal results. The first rule I learned in forex is to be able to leave to go. It often happens that the market is volatile so the risk is not acceptable for the size of my own. If these are the times you can do a lot more money than you normally can do. But remember, these are the times you can lose more money than they could win.
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