Stop Loss is a certain lowest price limits for trading forex. When forex price touch this value, the system will automatically close the order or position.
Reporting on Investopedia, for most traders, placing a stop loss is an uncomfortable choice. Why so? because it means they have received the losses incurred. However, each trader has the right to decide which trading model is most suitable for them, either by using stop loss or ignoring it. It depends to the trading strategy used by each trader.
If you are a trader who wants to control the risk of loss, you must know several types of Stop Loss.
Check out three types of Stop Loss to minimize your trading risks:
Manual Stop Loss
A trader should close his own trading position in trading software. When the price turns out to the opposite direction of expectations. This way requires discipline and high vigilance of the trader. If you are careless or negligent then the loss can be greater.
Automatic Stop Loss
Automatic Stop Loss refers to determine a certain price level where a trading position will be closed automatically if it reaches that level. Additionally, you can use this strategy on all trading software.
If you already know how to order (open trading positions) in Metatrader trading software or other trading software, then you will know that on the Order form, there is also a Stop Loss column. That’s where you write the price level in question.
Then, if the price turns out not moving in the direction you want, the trading position will automatically close once it reaches the level even though you are not currently monitoring trading.
Trailing Stop
Besides using the Automatic Stop Loss feature that can be placed on the order form, you can also use the Trailing Stop feature. If you use Stop Loss, you will certainly close the trading position in a loss condition. However, if you use a Trailing Stop, you can still gain profits even if the price moves in an unexpected direction.
Read more : Cut Loss, the Guardian Angel for Your Forex Trading