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  1. #1
    Join Date
    May 2008
    Posts
    120

    6. How to Place a Stop Loss and Take Profit Order

    The mission of InformedTrades.com is to create the ultimate resource for active traders of the stock, futures, and forex markets. We use these videos this youtube channel to post our trading education videos on technical analysis and the basics of trading. On our site you will find daily video market updates and headlines to help you keep on top of the markets and generate trading ideas. We encourage your comments and feedback so please feel free to leave your comments here.

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    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. As always if you have any questions or comments please leave them in the comments section below, and good luck with your trading!
    Last edited by InformedTrades.com; 08-21-2008 at 01:54 PM.
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  2. #2
    FXR679582001 is offline Registered User
    Join Date
    Nov 2008
    Posts
    1

    Stop Lose and Limit

    Hi

    I like the idea of Stop / Limit but most of the time, I got Stop before it rebounced or the trend reversed just a few PIP from the Limit. I starts losing faith of pre-setting stop on the system.

    E.G. for EUR/USD on yesterday trading.
    My entry price is 1.26402 in the morinig on Nov 3
    Stop set to 1.25334
    Limit set to 1.28950

    On the same day at 23:00, the low was 1.25254 and I got stopped out. The trend reversed after that. Now the price reach my limit. I suppose to make money but it end up with a 106.8 loss.

    Is there a way to fine tune it? This is not the first time I got stop when I set the stop values. It always like that unless I set a large stop e.g. 200 PIP or more. However, if it is really going down, I would lost more than a reasonable stop.

    May be I should set it just in my head. However, it does not help when I was away. The price may fall way below the stop value I have in mind.


    Some people say the big guy can view all the Stop / Limit values so they can manipulated them. Is it true?

    Thanks

  3. #3
    cliff is offline Member
    Join Date
    Jul 2008
    Posts
    72
    Did anyone get suckered to sell on brak out of bottom trend line. I did,
    If you did where did you put your stops and limits ?
    Thanks for any feed back
    รูปขนาดเล็ก รูปขนาดเล็ก 6. How to Place a Stop Loss and Take Profit Order-pond-2h-paint.jpg  


  4. #4
    bonzo5 is offline Member
    Join Date
    Mar 2009
    Posts
    3

    stop loss / limits

    before I proceed I would like to have the following clarified

    Having trouble following your previous lesson. When looking at the rate box, I see the numbers moving. I am, having difficulty holding a number when I buy. When I try to select the stop 20 pts above I am told that I need to select a number thats completely outside of my intention re the amount that I thought that I had bought. In other words the number are moving so fast, that I am not sure that the buy position when I clicked on "buy" is the same as I see in the rate box.
    Kindley clarify
    thanks

  5. #5
    smart-profits is offline Member
    Join Date
    Aug 2009
    Posts
    54

    TIMING IS KEY

    You are probably trading based on fundamentals or just overall trend. It's important to make good timing when entering the market. If the trend is up but is currently going down a little bit then wait for the right time to enter. You can also enter an entry order specifying when you want to enter and get a better price. In a nutshell either look at technicals to help make better entries or give yourself a larger stop loss cushion and make sure you have enough money in your account to sustain such a loss.
    Quote Originally Posted by FXR679582001 View Post
    Hi

    I like the idea of Stop / Limit but most of the time, I got Stop before it rebounced or the trend reversed just a few PIP from the Limit. I starts losing faith of pre-setting stop on the system.

    E.G. for EUR/USD on yesterday trading.
    My entry price is 1.26402 in the morinig on Nov 3
    Stop set to 1.25334
    Limit set to 1.28950

    On the same day at 23:00, the low was 1.25254 and I got stopped out. The trend reversed after that. Now the price reach my limit. I suppose to make money but it end up with a 106.8 loss.

    Is there a way to fine tune it? This is not the first time I got stop when I set the stop values. It always like that unless I set a large stop e.g. 200 PIP or more. However, if it is really going down, I would lost more than a reasonable stop.

    May be I should set it just in my head. However, it does not help when I was away. The price may fall way below the stop value I have in mind.


    Some people say the big guy can view all the Stop / Limit values so they can manipulated them. Is it true?

    Thanks

  6. #6
    GavinCole is offline Registered User
    Join Date
    Nov 2009
    Posts
    1
    I just opened a live account with 50 USD in the FXCM Micro account.
    But contrary to my demo account, when I logged into my live account, the Stop Loss and Limit didn't appear.
    How do I set stop loss here?

  7. #7
    Thomas Long's Avatar
    Thomas Long is offline DailyFX Power Course Instructor
    Join Date
    Nov 2007
    Posts
    2,365
    Quote Originally Posted by GavinCole View Post
    I just opened a live account with 50 USD in the FXCM Micro account.
    But contrary to my demo account, when I logged into my live account, the Stop Loss and Limit didn't appear.
    How do I set stop loss here?
    The micro forum might be a better place to ask questions like this, but here is a video that explains the difference and how to manage your trade for those micros based in the US:

    https://admin.na6.acrobat.com/_a205571165/p91063619/
    Enroll in our online DailyFX Course today and get personalized instruction from our team of expert traders 24 hours a day. We have taught over 25,000 students and in our online courses in the past. The new DailyFX Course has nearly 600 minutes of content delivered via video so you can learn at your own pace. Join the instructors in live webinars where they will show you how to use the highlighted tool in current market conditions. Click here to get more information.

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