Description / meaning of stop loss
stop loss limit is the value of the lowest prices that are determined to limit losses. When the price action touches this value, then the system will automatically close the order or position.
For most traders stop loss decision to put this is an uncomfortable choice. Why, because it means they have accepted the loss.
But every trader has the right to decide for themselves which is most suitable trading model with himself, either by using a stop loss or ignore it, it's back to the trader's own each. Each trader has his own characteristics in determining the value of this stop loss. Examples of application of stop loss is simple:
1. Based on the simple concept of money management
In that good money management is not good to risk our funds to exceed 2-3%, so in other words in that value should we place the stop loss. Example: Funds is $ 1,000, the pair EUR / USD with movement 1 pips = 0.4, with the limitation loss of 3% = $ 30, this means that the stop loss should be placed on: 30 / 0.4 = 75 pips.
2. Margin Stop
This approach is a bit radical that you have set the value of a margin call as a stop loss value. The system will automatically mengclose when a margin call occurs.
3. Based on technical analysis.
Approach is to use graphs and indicators (Bollinger Bands, Fibonacci, etc.) to determine the value. Of course, it takes skill and experience in analyzing the graph.
1. Based on the simple concept of money management
In that good money management is not good to risk our funds to exceed 2-3%, so in other words in that value should we place the stop loss. Example: Funds is $ 1,000, the pair EUR / USD with movement 1 pips = 0.4, with the limitation loss of 3% = $ 30, this means that the stop loss should be placed on: 30 / 0.4 = 75 pips.
2. Margin Stop
This approach is a bit radical that you have set the value of a margin call as a stop loss value. The system will automatically mengclose when a margin call occurs.
3. Based on technical analysis.
Approach is to use graphs and indicators (Bollinger Bands, Fibonacci, etc.) to determine the value. Of course, it takes skill and experience in analyzing the graph.