Sumary of Using Stop Loss Orders in Forex Trading:
- 24, 2021Market movements can be unpredictable, and the stop loss is one of the few mechanisms that traders have to protect against excessive losses in the forex market.
- Stop losses in forex come in different forms and methods of application.
- This article will outline these various forms including static stops and trailing stops, as well as highlighting the importance of stop losses in forex trading.
- A forex stop loss is a function offered by brokers to limit losses in volatile markets moving in a contrary direction to the initial trade.
- Regardless of how strong the setup might be, or how much information might be pointing in the same direction – future currency prices are unknown to the market, and each trade is a risk.
- In the DailyFX Traits of Successful Traders research, this was a key finding – traders actually do win in many currency pairs the majority of the time.
- As you can see, traders were successfully winning more than half the time in most of the common pairings, but because their money management was often bad they were still losing money on balance.
- Traders lost much more when they were wrong (in red) than they made when they were right (blue)In the article Why do Many Traders Lose Money, David Rodriguez explains that traders can look to address this problem simply by looking for a profit target at least as far away as the stop-loss.