Stop loss and take profit forms two important elements of trade management and is just as important as the analysis one would do before opening a position.

In this article, we present a brief guide to using stop loss and take profits and also present a detailed tutorial into how to set the Stops and target levels using the MT4 trading platform.

Stop loss and take profit levels are static in nature. In other words, the orders are triggered and your trade is closed when a security reaches a specified price level. For example , if you placed a Buy order on EURUSD at 1.

Stop Loss and Take Profit in Forex - ProfitF - Website for Forex, Binary options Traders (Helpful Reviews)

Likewise, when price moves to 1. The reason why traders would set a stop loss or target profit levels is to manage their trades better. Imagine trading without a stop loss, which could potentially exhaust all your equity.

Definition of "Stop Loss Order" in Forex Trading

Likewise, imagine not trading without a target price, which would basically expose your entire account equity to the market fluctuations.

Trailing stops are more dynamic in nature. When using trailing stops the stop price level changes after a specified number of pips. Some trading platforms allow you to also set a trailing stop based on percentage moves as well.

Stop-Loss Order Definition & Example | Investing Answers

Trailing stops are usually used when you want to take as much of profits as possible during extreme trends. For example, setting a trailing stop of 20 Pips would mean that a new stop level would be set when price moves 20 pips in your favor. For example, if you placed a Buy order on EURUSD at 1.

If price continues to move a further 20 pips, then the trailing stop moves another 10 pips in your favor setting your new stop loss order to 1. Trailing stops can be used alongside the take profit order as it can help to make your trade lock in as much pips as you want and as specified by the trailing stop instead of setting a static stop loss order.

The following chart below illustrates using stop loss, take profit and trailing stops. When you place a pending order , you can specify the entry, stop and target price levels. The following picture shows the order window when a pending order is used on the MT4 platform.

Trailing stops, stop loss and take profit levels are one of the easiest trade management actions a trader can do. Despite their simplicity, using stop loss and take profit levels can help a trader to manage their profits and losses in a more efficient manner without having to expose their capital too much and risk losing it in its entirety.

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