Hello and welcome to another edition of the bulls vs the bears. A thousand apologies for not updating the blog for so long. I experienced a few technical hitches with my blog right after uploading the first post. But thankfully that has been solved. Hopefully it wont happen again.
Now onward to today’s lesson. Today we ‘re going to learn how to get the hang of using stop loss and take profit orders in forex trading. Basically I’m going to explain how to place a stop loss and a take profit when trading forex. It is absolutely crucial that you know how to set a stop loss and take profit as a forex trader. IF you cant do this, you are doomed.
I get the question you need to be asking is:
What is Stop Loss and Take Profit?
Well stop loss is a simple order you send to your broker to limit your losses on an open trade. Think about this request as damage control to save your trading account from going up in smoke. On the other hand take profit is an order you send to your broker to close your trading position when price hits your profit target. Basically you want to head for the exits once you price hits your profit target. Let’s take a look at an illustration of stop loss and take profit loss in both buy and sell scenarios-starting with the buy scenario.
Ladies an gentlemen this is what the stop loss and take profit look like in a buy situation. With a buy trade the stop loss is placed just below the entry price. So that if price dips and hits your stop loss you incur a loss. The important point here is you decide how much money you can afford to lose and you are saving your account from going up in smoke.
The take profit is pretty obvious. As you can see take profit is is placed above the entry price. Once price hits your take profit target, you make your profit and head for the exit.
Now let’s look at the stop loss/take profit in the sell scenario
Ladies and gentlemen, this is what the stop loss/take profit in the buy trade looks like. Unlike the buy scenario, the stop loss is placed just above the entry place. While the the take profit is placed below the entry price. If the price rises and hits your stop loss you incur a loss. And just like the price scenario, the stop loss is there to save your account from going up in smoke.
The take profit is the complete opposite. When price drops and hits your take profit target, you make an instant profit-no questions asked. And when you make your profit, your profit is instantly recorded in your account. You don’t need to stick around to find out.
I guess the next question that is burning on everybody’s mind is:
How Do I Place Stop Loss and Take Profit Orders on MT4?
That’s fairly straight forward. First you open your order entry box by pressing F9 or using the right click option. Next you select “Trading and “New Order.”
Immediately the MT4 dialog box pops on your screen as shown above. You then go ahead and fill the parameters for your stop loss and take profit orders. If you want to sell, you click “Sell By Market.” And if you want buy you click”Buy by Market.”
That’s a wrap for “How To Get The Hang of Using Stop Loss and Take Profit in Forex.”You’d be absolutely insane if you don’t factor stop loss and take profit in your trading decisions. You need to treat forex trading as a business.
Every trade you enter has the potential of making you a profit or blowing your account into the ozone. With that in mind you need to weigh the risk of the trade as well as its potential reward. So if you want to be a profitable forex trader, make use of your stop loss and take profit orders.
Til next time take care.
Open Live Forex Trading Account
If you’re looking to open a live trading account sign up with EasyMarkets
Open Demo Trading Account
But if you want to get a feel for the platform first and practice your trading strategies before going live, open a free demo account with EasyMarkets