Lesson 6: How to Place a Stop Loss and Take Profit Order
Lesson 6: How to Place a Stop Loss and Take Profit Order
In our last lesson we started our discussion on the different order types available to forex traders with a look at the market order. In today's lesson we are going to continue our discussion on order types with a look at the all important stop loss order as well as something which is known as a limit order.
As we've discussed extensively in the money management section of our basics of trading course in the free course section of InformedTrades.com, it is not normally how good a trader is at finding entry points that separates the profitable traders from the unprofitable traders, but how good a trader is at exiting their positions.
Successful traders know that no trader is right 100% of the time over the long term, so they always have not only an entry price and profit target for their trade but also a price at which they will close out their trade should the market move against them.
Luckily most electronic platforms including the one that we have been practicing on, allow traders to leave standing orders on the platform which will close their trade if their stop loss level or take profit level is reached. This allows traders to step away from the computer if needed instead of having to sit and wait for the market to reach their level. Because these orders are executed automatically, some traders also use them to better manage the emotions involved with closing out positions when their target price or stop loss levels are hit.
To see what I am talking about lets login to our real time demo trading accounts and place some more trades. If you have not done so already I encourage you to pause this video now and click the link above this video if you are watching on InformedTrades.com or in the description section if you are watching on YouTube and register for a free demo account so you can follow along as well.
Lets say for example that your analysis tells you that the current price for EUR/USD is a good sell price. Your analysis also shows you that 20 points above the current price would be a good level to exit the trade at a loss should the market move against you and that 50 points below the trade is a good level to exit the trade at a profit should the market move in your favor.
As we know from our previous lessons the first step in the process to place this series of orders is to place the market order, so go ahead and click on the buy rate for EUR/USD and execute a 1 lot trade in EUR/USD.
Once that trade is executed it should show up in the open positions window of the platform where you can see the open and current close price for the trade. In this window you will also see a column that says "Stop". Left click on this column which will bring up the stop loss window. In this window you also have a line that says "rate" in this box you can change the rate to reflect the rate at which you wish to be taken out of the market should the market trade against you. In this example we said we would like to be taken out of the market if it trades 20 pips against us so adjust the number in this window to reflect that and then click ok. Once you have done this you should see you new stop loss order appear in the stop column of the open positions window where you now have an order which will close out this position should it reach that level.
Next click the limit column in the open positions window which will bring up the limit or take profit order window. As we said in our example we want to be taken out of the market at a profit if the market moves 50 pips in our favor so adjust the rate in the rate line of the window to reflect this and then click ok. Once you have done this you should see a new limit order appear in the limit column of the platform which will close this position should the market reach that rate.
Both the stop loss and limit order on this particular platform are known as One Cancels Other or OCO orders which means that if your stop loss or limit price is hit, not only will the trade be closed but the opposing stop loss or limit order which was not hit will be canceled as well.
Lastly if you wish to change the rate for either your stop loss or limit order you can do so by simply clicking on the stop or limit column again and adjusting the rate accordingly.
For tonights homework assignment I encourage you to use some of the tools we have learned about in our trading basics course to find trading opportunities and place a trade with both a stop and a limit using the knowledge we have learned here today. If you would like to share your trade and analysis with the InformedTrades.com community I am sure we would all love to see it.
Thats our lesson for today. In our next lesson we will go over another type of order which can be used to enter the market which is known as an entry order so we hope to see you in that lesson.
Actionable trading levels delivered to YOUR charts in real-time.
Mon 28 May 2018 AA GB/US- Holiday Tue 29 May 2018 A CB Consumer Confidence Wed 30 May 2018 AA 12:15 US- ADP Private Payrolls A 12:30 US- GDP A 14:00 CA- Bank of Canada Thu 31 May 2018 A 06:00 DE- Retail Sales A 09:00 EZ- flash HICP A 12:30 US- Weekly Jobless AA 12:30 US- Core PCE Deflator A 14:00 US- Pending Homes Sales A 15:00 US- EIA Crude Fri 1 Jun 2018 A Various Final PMIs A 08:30 GB- GDP A 12:30 US- Durable Goods AA 12:30 US- Employment
John M. Bland, MBA co-founding Partner, Global-View.com
Global-View Affiliate Program
We are starting an affiliate program to market some of our products.
Send me an email if you would be interested or if you know someone who would like to be an affiliate. Generous commissions payout for those accepted.
Put the word "affiliate" in the email subject line.
Veteran FX Trader, Max McKegg, forecasts all the Major currencies and the Australasians; providing Daily and Medium Term Trading forecasts to subscribers, who include large Banks the world over, as well as individual traders in more than 30 different countries.
looking for your first broker or do you need of a new one? There are
more critical things to consider than you might have thought.
We were trading long before there were online brokers. Global-View
has been directly involved with the industry since its infancy. We've
seen everything and are up-to-data with recent regulatory changes.
The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.
The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.
Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by Global-View.com.
The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.
Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.
Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.
Global-View.com also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at Global-View.com. This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.
WARNING: FOREIGN EXCHANGE TRADING AND INVESTMENT IN DERIVATIVES
CAN BE VERY SPECULATIVE AND MAY RESULT IN LOSSES AS WELL AS PROFITS. FOREIGN
EXCHANGE AND DERIVATIVES TRADING IS NOT SUITABLE FOR MANY MEMBERS OF THE
PUBLIC AND ONLY RISK CAPITAL SHOULD BE APPLIED. THE WEBSITE DOES NOT TAKE
INTO ACCOUNT SPECIAL INVESTMENT GOALS, THE FINANCIAL SITUATION OR SPECIFIC
REQUIREMENTS OF INDIVIDUAL USERS. YOU SHOULD CAREFULLY CONSIDER YOUR FINANCIAL
SITUATION AND CONSULT YOUR FINANCIAL ADVISORS AS TO THE SUITABILITY TO YOUR
SITUATION PRIOR TO MAKING ANY INVESTMENT OR ENTERING INTO ANY TRANSACTIONS.