Using a Guaranteed Stop Loss When Trading

If you don’t use risk management tools to protect your investments when forex trading, there is every chance your next trade could be your last.

This statement is especially true if you are an inexperienced or beginner trader. While the forex market is the most liquid of all financial markets – meaning forex movements tend to be small – occasionally an event can occur which can see dramatic changes in forex prices. This can result in significant losses to your finances and can be crippling if you are trading with leverage.

For this reason, it is wise to use a stop loss or guaranteed stop loss when trading forex. 

Use a stop loss when forex trading for better risk management

A stop loss is a risk management tool that can help protect you against losses when trading. When you open your position, you can include an instruction to your broker to exit your trading position when a certain forex price is triggered. Should this price be triggered, your broker will attempt to automatically sell your open position.

To set a stop loss, you define your stop limit – which is how many pips away from your entry price you wish to have your position closed. Should this limit be triggered, the broker will attempt to close your position to protect the finances in your trading account.  

Justin Grossbard of CompareForexBroker says that as a trader, your challenge is to determine the right place to put your stop loss. There is a fine line between giving your stop limit enough space so that natural market fluctuations don’t trigger the stop loss and too much space that you lose more than you should have on a bad trade. 

Many traders make the mistake of being too conservative and placing the stop too close to their opening price. This happens because traders make decisions based...

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