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The Importance of Stop Loss
The trading process is full of risks, so is it important to place Stop Loss?
In the beginning, let’s get acquainted with one of the pending orders. “Stop Loss” is an order in the markets that is used to close a losing trade as soon as it reaches a certain level and is achieved when it touches the Ask line of the order. It simply adds more protection to the trader’s account and limits risks. The importance of stop loss must be understood, whether a trader is using it for safety only or as an integral part of their strategy, there are two types of stop loss in trading:
Fixed Stop Loss: It is a market order used to close a losing trade once it reaches a certain level.
Trailing Stop Loss: It is the process of successive stop-loss, i.e. controlling the “SL” order.
The “Stop Loss” stop loss is the easiest way to exit any trade with minimal losses, some traders place a stop loss order permanently for all their trades, taking advantage of the possibility to modify the stop loss order at any time when the deal is open, and determine where to place the order and how many “PIP” points it is away from The price of opening the deal depends on the trader’s trading style and the amount of risk he follows in his trades.
It is not preferable to place it close to the market price at which the deal was opened, or in an area where the price is difficult to reach! Most of the novice traders think that a smaller stop loss distance means less risk and a larger distance means more risk, and this is incorrect. It is clear that the size of the contract being traded determines the risk for each trade, not the distance in stop loss orders, but the distance between stop loss orders No less important is the size of the position a client trades, but it is the “lot size” that determines how much money is risked for each trade!
It is better for one to lose one or two trades at a cost of 100 pips than to lose in the latest trades that may cost 1,000 pips. Many traders place the same SL for all the trades they execute without even trying to measure the market environment for this trading tool and this Certainly it is wrong, the stop loss is based on important things, including the trend line, technical patterns or Japanese candles, each has a way to determine the stop loss, by using the stop loss order you can get better control over your trades and your money, and your risks can be reduced and your trading opportunities are maximized.
It is well known that one of the advantages of the stop loss order is its ability to act as a protection against the “negative balance“, that is, it prevents the client’s trading account from entering into the negative. But fortunately, TNFX provides the feature of negative balance protection, that is all of its clients’ accounts when their account balance reaches a negative amount, it will automatically revive to zero.