Trading in the forex market requires a good strategy to manage risks and maximize potential gains. Every trader should know two essential tools: Take Profit (TP) and Stop Loss (SL) orders. These tools help you automate your trading strategy, ensuring you lock in profits and limit losses. Let's explore what these terms mean and how to use them effectively.
What is Stop Loss and How Does It Work?
A Stop-Loss order limits potential losses by automatically closing a trade when the market moves against your position to a certain level. It is a crucial tool for risk management in trading.
- For a Buy Order: The Stop Loss is placed lower than the opening price. For example, buying a currency pair at 1.3000 might set the Stop Loss at 1.2900.
- For a Sell Order: The Stop Loss is placed higher than the opening price. For example, if you sell a currency pair at 1.3000, you might set the Stop Loss at 1.3100.
What is Take Profit and How Does It Work?
A Take Profit order is designed to automatically close a trade once it reaches a predetermined profit level. This helps traders secure profits without having to monitor the market continuously. The Take Profit level is set at a price where the trader wants to take advantage of the market movement.
- For a Buy Order: The Take Profit is placed higher than the opening price. For example, if you buy a currency pair at 1.3000, you might set the Take Profit at 1.3100.
- For a Sell Order: The Take Profit is placed lower than the opening price. For example, if you sell a currency pair at 1.3000, you might set the Take Profit at 1.2900.
How to Set Up Take Profit and Stop Loss
For New Orders:
- Click on the "New Order" button.
- In the new order window, you will find separate fields to indicate your Take Profit and Stop Loss levels.
- Enter your desired levels and confirm the order.
For Running Trades:
- Navigate to the Trade tab to find your open trades.
- Right-click on the order you want to modify.
- Select "Modify or Delete".
- Enter the desired Take Profit and Stop Loss levels and confirm the changes.
Note: If you are using One-click trading, you won't be able to specify the Take Profit or Stop Loss levels for new orders directly. You will need to modify the open order to set your TP/SL level.