How to Determine Stop Loss in Forex Trading
How to Determine Stop Loss in Forex Trading is an article that discusses the importance of stop loss in forex trading. In forex trading, often our position is not in accordance with market movements. Because of this we often have to be strict with ourselves by setting stop loss. Stop loss is one form of risk management in forex trading. The term stop loss means closing a position that is losing position at a certain level. To close that position we must ensure that market conditions will actually move further opposite our position.
How to Determine Stop Loss
There are several ways to determine the stop loss level based on the strategy, namely:
1. Stop loss in blind forex trading
Blind forex trading is trading that focuses on money management. Entry points, exit points, profit targets and stop losses on blind forex trading are not the result of an analysis, but because of a mathematical calculation of a trading strategy. For example: Open buy of 5% equity with take profit of 10 pips and stop loss of 10 pips. A blind trader does not need an analysis in determining stop loss. Because once the transaction loses, he will do the next strategy.
2. Stop loss on real forex trading.
Stop loss on real forex trading is important. If your analysis is good, just set the stop loss to avoid large losses.
a. Use the Parabolic SAR indicator or other indicator.
The selection of this indicator depends on the forex trading pattern of the forex trader itself.
b. Using Support or Resistance Lines
Support or resistance is the price level that is usually used as a bounce point for the market. So that we can place stop loss positions behind the support and resistance lines. The assumption is that the level will not be touched because the market will bounce before the stop loss level. If the support and resistance lines are successfully broken, the price will continue to advance. So it’s correct if we put a stop loss behind the support and resistance lines.
c. Using trend lines
The trend line can also be a stop loss level on the grounds that as long as the trend is not over, the chart will always be ahead of the trend line. So if the chart crosses the trend line, we can be sure the price will continue to move away opposite our position.
Perhaps often this stop loss problem becomes a “nightmare” for traders. But it is better to take a stop loss than our loss becomes even greater, which will result in a trauma effect on our forex trading patterns.
So the point is that stop loss is reasonable (even for professional traders), and there is always a new opportunity every day on the market.