This is a very popular strategy in Forex and most of the traders set Stop-loss to save their capital. This presentation going to tell you some ideas of stop losses in forex trading.
4. Stop Losses in Forex Trading
The Stop Losses function is a valuable tool to
safeguard the value of foreign currency
trades.
It is especially true when the price of the forex
pair starts to move into negative territory.
You simply set the stop-loss level, which
determines the most you can lose on position
if the price moves against you.
5. You should bear in mind that the stop-losses
can work for you or against you in the online
trading.
While they protect against sudden movements
in the price, they can result in fear based
trading which is equally detrimental.
6. If you decide to maintain the narrow stop-losses
and collect on winning trades too early, this will
result in the incremental wins and losses.
And there will be a loss of overall trading activity.
7. Types of Stop-Loss
If you are wondering how stop-loss can help
you while you are trading, it is a good idea to
understand the several different stop-loss
tools and techniques.
1. Average True Range
This stop-loss technique is used in many
charting packages, and it factors volatility into
the price of tradable instruments.
8. 2. Trailing Stop
It is possible to secure your profit while
limiting your risk, by using a trailing stop.
It is a special type of stop-loss adjusts your
stop level automatically when your position
runs into profit, to lock in your gains.
9. As the price of the tradable instrument rises, so
too does the stop-loss.
But when the price falls beyond the stop levels
your position is closed automatically as with a
normal stop loss.
10. 3. Guaranteed Stops
This stop-loss allows you to limit the risk on
trades even when market gaps occur.
A Guaranteed Stop always represents the
maximum that you can lose on a position, and
there is a small premium for the absolute risk
protection.