What is Stop Loss?

Explanation/meaning of a stop loss

Stop loss is the value of the limit lowest price yg is determined to limit losses. When price movement touches on this value, then the system will automatically close the order or the position.

For most traders the decision put a stop loss this is an uncomfortable choice. Why, because it means they have accepted the losses that occurred. However, each trader has the right to decide for yourself which model best suited to trading him, either by using a stop loss or ignore it, it comes back to talk to the traders themselves.

Every trader has its own characteristics in determining the value of stop loss. An example of a simple implementation of the stop loss is:

1. Based on the concept of money management is simple:

In this yg good money management is not good for us to risk the funds to exceed 2-3%, so in other words in the value that we place the stop loss should be.

Example: the Fund is 1000 $, pair EUR/USD movements 1 pips = 0.4, with 3% losses limit = $ 30,

This means that the stop loss should be placed on: 30/0.4 = 75 pips.

2. The Margin Stop

This approach is a bit radical i.e. you have set the value of the margin call as the value of the stop loss. The system will mengclose automatically when margin call occurs.

3. On the basis of technical analysis.

This approach is to use the graphs and indicators (bollinger bands, fibonacci, etc) to determine the value. Of course it takes finesse and experience in analyzing the graphs.