EURUSD 1.1860 USDJPY 111.61 USDCAD 1.2371 EURCZK 26.031 USDCZK 21.944 EURPLN 4.2728 USDPLN 3.6032
EURUSD 1.1860 USDJPY 111.61 USDCAD 1.2371 EURCZK 26.031 USDCZK 21.944 EURPLN 4.2728 USDPLN 3.6032

Start real trading in just 30 minutes

Start real trading in just 30 minutes

Micro-lots with no minimum deposit!

Open demo account MetaTrader5

Open demo account MetaTrader5

Opening demo account is the first step

Demo account in MetaTrader 4

Demo account in MetaTrader 4

All-time trading platform classic

For beginners

For beginners

Learn the basics of financial markets

Open transactions can be protected against unpredictable losses and negative scenario by using stop loss orders

Rule of thumb

Stop orders limit potential financial losses, however in specific market conditions may also lead to premature closing of  a position

There are several reasons behind using stop loss orders, most typical of them include situations when:

  

  • A trader wants to limit potential losses to a certain level, for example – one wants to make sure that no matter what happens, the loss will be no more than 40 points on the deal.
  • There is a certain price level that one considers to be crucial for the further development of the situation on  a market. This may be for psychological (round numbers like 1,50 on the EUR for example), technical (support, resistance and other levels suggested by technical analysis) or whatever other reasons.
  • The trader is using a predefined trading strategy, either manual or automatic, that assumes that the stop loss is set for each of the open positions according to the trading plan. This can be based on some technical indicators, like Moving Average, Parabolic SAR, or other factors.

 

Of course there may be many other good reasons to do that. Alternatively, some traders may feel that  there are good reasons not to set stop loss at all, such as:

   

  • Too tight a stop loss may cause the position to close prematurely. It may happen that just before the strong movement in the predicted direction, the market makes a short swing in the opposite direction, closing the position just a moment before it was going to become profitable.
  • Too distant a stop loss may cause the position to close too late, in relation to the trade change signal resulting from the trading system used, incurring in this way additional losses (or lower profit).
  • Many traders may feel a psychological barrier against considering a negative scenario in general, or setting a predefined stop loss level in particular. Stop loss represents a definite level where the position is closed when the market situation turns in the wrong direction. In such a situation, it is  human nature dictating that „hope dies last”.

 

The ultimate decision belongs to the each individual trader and should be based upon the experience and the consideration of the situation on the given market. In any case it is strongly advised to define and follow a risk management strategy when trading. More on this topic can be found in our Risk management section.

Pola oznaczone gwiazdką są wymagane.

zamknij