Stop Loss and Take Profit in Forex
Also known as SL, Our saviours are Stop loss. They help to stop the complete annihilation of your account. You may put a stop to losses on any trade you choose to enter the market.
A stop loss acting as a buffer is a specified price level that you are in full control of on the market. If a trade you have entered does not turn out the way you have expected, you will automatically be exited from that trade when your selected stop loss has been reached. In other words, you don’t want to go back to your computer to take your own life.
You decide to take a buy position on the EUR / USD at 1.1020 and place a stop loss at 1.0980, then this would be a 40 PIP stop loss. Depending on the amount of money you place per PIP, and if the trade goes less than 40 PIPs against you, you’ll only lose what you’re comfortable losing.
TP, Take profit is the opposite of a stoploss; instead of serving as a safety net or leaving a bad deal of loss, take profit will immediately close in profit until your target status is reached and this will be added to your account history ready to be removed.
You decide to put a buying position on EUR / USD at 1.0920 and take a profit at 1.0980, this would be 60 PIP take a profit.
Depending on the amount of money you put per PIP, your position will be closed and the gain will be taken at your chosen rate. This will happen regardless of whether or not you are seated in front of your computer screen.
What if YOU do not use SL/TP?
Your account will always be at high risk and could blow.