Types of Stop Loss

Stop loss or cut loss is a risk management method that traders should take with the aim of increasing their chances of profit in the next trading session. A stop loss is something that a trader must do to prevent something that a trader does not want, namely a loss due to a wrong analysis of the market conditions that the trader is observing. Mistakes that traders have made should not have a very high tolerance because the higher the tolerance that traders give, the greater the value of losses that traders will get, so the stop loss really has to be executed by the trader.

Stop loss or cut loss traders can do manually or automatically. If the trader wants to do it manually, at least the trader must often see the price movements of the currency pair that the trader is trading, but if the trader does it automatically then the trader does not need to do it so that the trader can do other activities such as vacation or rest. By making a stop loss, it means that the trader extends the life of the trader's trading account so that the trader's account continues to be able to get the opportunity to get the next profit.

To make a cut loss or stop loss, the trader must first determine the amount of risk that the trader accepts (what percentage) then the trader pulls it down or up from the buy or sell price.

For example, a trader wants to buy a 1K AUD/USD currency pair (micro account) at a price of 0.77980 and a trader wants to place a stop loss of -82 pips, the trader's stop loss will be at a price of 0.77160 (0.77980-82).

Not only determine the stop loss that traders can do automatically (by system) but also determine when to take profit and exit the market, traders can do it automatically. For example, a trader will exit the market or realize a profit if the price moves along 42 pips, then all the trader needs to do is increase the purchase price by a number of take profit values ​​that the trader has determined. So the trader's take profit value will be executed at a price of 0.78400 (0.77980+42). To determine the stop loss there are several ways that can be used, among others, based on:

  1. Percentage
  2. Volatility
  3. Chart
  4. Time

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