All Profiting Top tier traders have Forex Stop Loss strategy when entering position
After many years of experience, a profiting top tier trader must realize how an uncontrolled set of trades can lead into catastrophe. Without Forex stop loss, you are vulnerable against slippages and it is the only way that you can protect yourself from emotional trading decision and unnoticed trading loss. All Forex traders cannot predict the future of the market 100 %. Whether the trend is strong or weak, the market is always on the move. Since you cannot be on the computer monitoring all positions without resting, Forex stop loss strategy is a great tool to help you trade with ease.
What is Forex Stop loss?
Simply, it is an automatic order to sell a position at specific price.
- When buying the currency pair, you should set your Forex stop loss right below the support area, where there has been buying pressure before. It’s an area where traders tend to buy. Usually when a price violates a support line, and moves below support line, it tends to move a lot lower. So If you’re buying a currency pair, there is no reason to keep the trade open if the price moves below the support line. For example, if the support line is 1.74 with a lot of buying pressure shown in the movement, and the price is not moving below certain support line, you are to set the Stop loss at 1.73.
- If you are selling a pair, set the Forex stop-loss above the resistance area. It’s an area where selling pressure, traders are trying to sell the currency pair. When the price violates resistance line, it moves above the line and tends to move much higher. If you’re selling the pair, there is no reason to keep the trade open. For example, if the resistance line is 2.90, then the stop loss should be at 3.