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January 10, 2018

Question:How to use Take Profit/Stop Loss orders? How do they work?

Answer:

Stop Loss is an order that limits losses if the price goes in an unprofitable direction.

It automatically closes the position when the price reaches a certain price level. To protect the deposit from negative market fluctuations and unexpected events, traders determine the amount they can afford to lose and set Stop Loss at a level they considered to be acceptable for possible losses.

According to the professional traders, the maximum risk level for each transaction should be 2-3% of the trading capital.

How to use Take Profit on Forex?

Take Profit is opposite to the Stop Loss order, it is used to fix profit. If the price reaches the Take Profit level, an order closes automatically and fixes the profit even when the trading terminal is offline.

The standard loss/profit ratio is considered to be 1:3. So, if Stop Loss is 20 points, Take Profit should be 60.

The potential profit should exceed the risk by several times.

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