Ability to apply Stop Order in Forex trading
Specially designed orders that ensure the reduction of possible losses for traders are called Stop Order. They will allow you to sell securities when they reach maximum quotes in case there comes an unexpected change of graphics. This is a convenient tool when you are not able to constantly monitor changes in market conditions, immediately responding to price fluctuations. The correct settings of Stop Order, the choice of the optimal strategy in a particular situation on Forex minimize losses, helps to maximize the investment into income.
Why do they play such important role?
- In fact, Stop Order is an order of your broker placed on the Forex trading platform. For the sale of securities when they reach a certain level.
- It is used as a tool to reduce potential investor losses in case of unexpected drop in quotes at the site.
- For most brokers, this is a long position with long-term investments, but it may well work as a short one with high efficiency.
- Using Stop Order, you can neutralize the negative impact of emotions, translating the work into a pragmatic channel that does not allow you to lose money.
No expert can accurately predict how Forex market will react to events in the economy, and Stop Order serves as original anchor that stabilizes the movement of your vessel in a given direction on the way to high profits. In any, even the most thoughtful transaction, there is a considerable part of risk, which is why orders are so in demand.
Proper setup of Stop Order
The usage strategy is chosen only by trader. He can set a statistical price, focusing on the most appropriate level of value of securities. The minimum ratio of risk to profit does not give a large income, but SL will not allow you to lose investment in a critical situation.
By setting a statistical stop of 50 pips at each position being processed, a take-profit equal to a stop distance is fixed. In order to fix the risk to profit ratio in the sizes of one to two, we put a statistical stop of 50 pips and a limit of 100 pips.
Using current information on the state of the foreign exchange market, traders set Stop Order on the average true range. You need to understand that with strong market volatility, 50 pips is a small advance, and with a peace – serious movement. Such a tool allows more accurate usage of indicators such as pivot point and average true range. Therefore, it is important to understand how to correctly set Stop Order.