How to use Stop Loss and Take Profit

How to use Stop Loss and Take Profit

How to use Stop Loss and Take Profit

Stop loss and take profit are the most important tools on Forex Trading and is just as important as the analysis one would apply on every trade they make. In this article, we present a brief guide to using stop loss and take profits and also present a detailed tutorial into how to set the Stops and target levels using the MT4 trading platform.

Stop loss (SL) is a target set by the traders on their trade which will automatically close the trade  if the market goes against them.Stop loss is very usefull on forex trading as it autometically close the market if the Market reaches the Sl. It can save trader from huge loss.


Take profit (TP) is a target set by the traders on their trade which will automatically close the trade  if the market goes in favor to them. Since the market fluctuate alot TP will help secure the profit.

Stop loss and take profit levels are static in nature. In other words, the orders are triggered (and your trade is closed) when a security reaches a specified price level.

For example, if you placed a Sell order on NZDUSD at 0.6570 and set stop loss at 0.6595 and take profit of 0.6543, when price moves below your entry and hits  0.6543 your order is closed for a profit of 33 pips. Likewise, when price moves to 0.6570, your order is closed for a loss of 25 pips.

What is Trailing stop:
Trailing stops are dynamic in nature. When using trailing stops the stop price level changes after a specified number of pips. Some trading platforms allow you to also set a trailing stop based on percentage moves as well. Trailing stops are very applicable when you want to take as much of profits as possible during extreme trends. For example, setting a trailing stop of 30 Pips would mean that a new stop loss would be set when price moves 30 pips in your favor.

For example, if you placed a Sell order on NZDUSD at 0.6570 and set the initial stop loss to 0.6595 and a trailing stop of 10 Pips, then if price moves 20 pips in your favor the new stop loss would be moved to 0.6585. If price continues to move a further 20 pips, then the trailing stop moves another 10 pips in your favor setting your new stop loss order to 0.6575 (thus locking in 10 pips of profit).

Disadvantage of using SL/TP/Trailing Stops.
No one knows that the exact movement of the market. If Stop loss is placed without proper knowledge it can be taken out as the market swings.
      If the market is not extremely trending Trailing stops also will be taken out when the market fluctuate. 

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Trade forex for free

Trade forex for free.

Fig 1: Trade free

Do you believe forex can be traded without investing a penny from your pocket?

Yes it is very possible and can be made some dollar from it. I have done this before and made some money out of it. You probably heard or traded with no-deposite bonus offered by different broker. But are they allowed withdraw the profit without any special condition like you need to deposit to withdraw the profit, you need to complete certain lot to withdraw the profit etc? no right ?.

And you also heard about instaforex which is very good broker which offers different bonus for new trader who want to test their skills on live market. Instaforex gives the bonus for post and unlimited profit can be made  and withdraw it without any complication. Yes ofcourse traders must follow some rule on trading and posting on forum but it is not that hard conditions.

What you need to do is,

Register with instaforex.com

Put referral as portalforum

Fig:show how to put portalforum

Finish the registration process

Now register with Indian-forum

How to register with Indian-forex forum?

Goto this link Indian-forex

Register with any data you want

After that log in to the forum

Goto profile

Find the bonus for post

Put your account detail

Put your instaforex account to Indian forex forum

How much will you get?

20 cent/post

250$ /month

You can make as much as you want with that bonus which is withdrable.

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Table of content

About forex

    1. What is Forex

    2. Terms used in forex

Choosing Broker

    1. Types of Broker

    2. What should we seek when joining Broker

    3. Trading Platforms

How to trade

    1. Guide to mt4

    2. Placing orders

    3. Using stoploss/take profit/Trailing stops etc

Tips:

    1. Trade Forex for free (Bonus for Posting)

Tutorials

Candle sticks

Formation for candle stick and possible meanings

Using Supports and Resistance

Trading with Price Action

Different Trading systems

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foreign exchange trading platforms with picture

How to trade (Mt4 GuideWith Picture)

Fig:MT4

I will be using Mt4 as an example.But don’t worry Almost all the feature are same.

First , Register with This Broker  or This Broker

Then create a demo account

Now to open the desired pairs for example, Go to the top left red arrow I placed and click/ You will get  the small window with pairs/click it and your desired pairs will open.

Fig:show how to open the desired chart of the pair on MT4

 To install apply the indicators on chart,You can either use the inbult indicator that broker provided with the software or u can use the custom indicater which can be downloaded from internet.

To use the inbuilt indicator goto/Insert/Indicators and click on desired indicator.

Fig:Shows how to to apply indicator on MT4

To install the custom indicator goto /file/open folder and follow the below pic and place the file as per needed.

Fig:Shows how to install new indicator on MT4

Fig:shows how to install new indicator on MT4(a)

To open the new order goto/New Order

New order window will open as like below.Click on sell by market if you want to sell and if you want to buy click on buy by market.

Fig 4: Shows how to open new order

Note: It is very important to know all the features of the software to trade comfortably so please play all the function and feature of the software on demo account.

Fig 5: Please see it yourself to understand more

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broker trading online

What should we seek when joining Broker

fig : How to get the best broker

Since there are thousand of brokers and increasing the number drasatically day by day, There are many broker which opens and close in no time. And there are many fraud brokers so before trading forex with broker we need to learn about them if they are good broker or not.

1.Is the broker regulated or not?

Is this broker registered with any regulating authorities? Check to see if your broker of choice is registered with the National Futures Association (NFA) or Commodity Futures Trading Commission (CFTC) if they're based in the US. If the broker is based in the United Kingdom, check with the Financial Service Authority (FSA). If the broker isn't registered with any of these or any other recognized regulating firm, then you may want to think twice before signing up with them.

2.Do not trade with DD (Dealing desk Broker), Find if the broker is ndd, stp or ecn. Ecn accounts are very good to trade with.

3.Learn about withdrawal method and depositing method. There are many good brokers like ic market, Caesar trade who accept many method to deposit  but they don’t accept skrill to withdraw even if you deposited with skrill. Before you start trading with broker choose as per your need.

4.Know if the broker has any hidden terms and conditions like scalping is accepted or not I;e how much time should trader stay on market ofter entering the order, Hedging is accepted or not? Etc. Find broker who offers traders to trade with no conditions.

5.Be aware of using high Leverage. How much leverage will a broker give you?.Leverage is like a double edged sword. It can kill your account if you can’t use it properly. Having high leverage is good but trader must know how to use it. If trader doesn’t  have good knowledge about leverage the best thing he/she can do is avoid high leverage.

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Broker and its kind

Know which broker to choose.

What is Broker and What Kind of Broker.

A forex broker is an intermediary between you and the interbank and provide currency traders with access to a trading platform that allows them to buy and sell foreign currencies. Interbank is a term that refers to networks of banks that trade with each other. Typically a forex broker will offer you a price from the banks that they have relationships with. Many forex brokers use multiple banks for pricing and they offer you the best one available

Types of forex brokers: ECN , STP, NDD, DD

ECN - Electronic Communication Network: ECN brokers provide and display real-time order book information (featuring the orders that were processed and the prices offered by banks on the interbank market). They thereby improve market transparency by providing information to all market participants. ECN brokers usually make their money by charging a commission on the traded volume. With ECN brokers, all transactions are directly processed on the interbank market in No Dealing Desk mode.

STP - Straight Through Processing: In STP mode, transactions are fully computerised and are immediately processed on the interbank market without any broker intervention

NDD - No Dealing Desk: An NDD forex broker provides direct access to the interbank market; it can be an STP or STP+ECN broker (see below for STP and ECN broker definitions). With a genuine No Dealing Desk broker, there is no requoting of prices, which means that you can trade during economic announcements without any restrictions. The spreads offered are lower, but they are not fixed, so they can increase significantly when volatility is increasing during major economic announcements. An NDD broker can either charge a commission on each trade or choose to increase the spread.

DD - Dealing Desk: A dealing desk broker is a market maker. Market makers typically offer fixed spreads and may elect to quote above or below actual market prices at any time. Market makers are always the counterparty of the trader, who doesn't trade directly with the liquidity providers. Market makers get paid through the spreads, and they usually also take the opposite trades of their clients prior to covering themselves (or not) with regards to the liquidity providers.

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About Forex

Simplyfied

Fig : Mt4 Forex

Forex is simply short form of foreign exchange. Forex market is the market in where currencies are traded. The forex market is the largest, most liquid market in the world with an average traded value that exceeds $3 trillion per day and includes all of the currencies in the world. Forex is the market where one currency is traded for another this means forex is traded always in pairs. For example EUR/USD,  GBP/USD,  AUD/USD,  NZD/USD etc.To understand the forex trading we need to understand some forex terms like Quotes, Bid and Ask price, Spread, Pips, Lot, Leverage, Margin  Etc.

      Quote: As I explained forex is done in pairs,  The reason that currencies are quoted as a pair is because when you buy a currency you are selling a different one as well. but the currency pair itself can be thought of as a single unit, an instrument that is bought or sold.

For example EUR/USD=1.3629/30

In the above example of EUR/USD, EUR is a base currency and USD is a quote currency. If you buy a currency pair, you buy the base currency and sell the quote currency. And if you sell the currency pair, you sell the base currency and buy the quote currency.

      Bid, Ask And Spread Price Pips: A Forex Trading Bid price is the price at which the market is prepared to buy a specific currency pair in the Forex trading market. This is the price that the trader of Forex buys his base currency in. In the quote, the Forex bid price appears to the left of the currency quote. For example, If the EUR/USD pair is 1.2342/45, then the bid price is 1.2342. Meaning you can sell the EUR for 1.2342 USD.

       A Forex asking price is the price at which the market is ready to sell a certain Forex Trading currency pair in the online Forex market. This is the price that the trader buys in. It appears to the right of the Forex quote. For example, in the same EUR/USD pair of 1.2342/45, the ask price is 1.2345. This means you can buy one EUR for 1.2345 USD.

Fig 1: shows the bid ask and spread price of EUR/USD

      Spread: In the above fig1 You can see the two different prices with slash in order window of the metatrader4 software. If you buy EUR/USD pair, you will enter the market at 1.10456. if you sell EUR/USD PAIR then you will enter the market at 1.10426. The difference between these two prices is referred to as the 'Spread'. The spread is essentially the profit a broker or bank makes for you to enter the trade (your transactional cost). The wider the spread the more expensive it is for you to trade, whereas the thinner the spread the cheaper it is to enter the trade. In the above example of fig1 spread is equals to 3.

      Pips: “PIP” stands for Point In Percentage. More simply though, a pip is what we in the forex market would consider a “point” for calculating profits and losses. A "pip" is the smallest whole increment in any Forex pair. For pairs quoted in 3 decimal points a pip increment is based on the second decimal. For pairs quoted in 5 decimal points a pip increment is based on the fourth decimal, like the EURUSD below.

Example:

EURUSD: A movement from 1.10426 to 1.10456 is a 3 pip move

In USD/JPY, a movement from 104.471 to 104.481 is 1 pip

      Lot: A lot is the smallest trade size available. Different broker has different standard lot size. For example; FXCM accounts have a standard lot size of 1,000 units of currency. Account holders can however place trades of different sizes, so long as they are in increments of 1,000 units like, 2,000, 3,000, 15,000, 112,000 etc.

      Leverage/Margin: All trades are executed using borrowed money. This allows you to take advantage of leverage. Leverage of 400:1 allows you to trade with $1,000 in the market by setting aside only $2.50 as a security deposit. This means that you can take advantage of even the smallest movements in currencies by controlling more money in the market than you have in your account. On the other hand, leverage can significantly increase your losses. Trading foreign exchange with any level of leverage may not be suitable for all investors.

     The specific amount that you are required to put aside to hold a position is referred to as your margin requirement. Margin can be thought of as a good faith deposit required to maintain open positions. This is not a fee or a transaction cost, it is simply a portion of your account equity set aside and allocated as a margin deposit.

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