When trading, there are so numerous risks and ways for you to lose money that you have to use all available tools and methods to reduce losses. Two of the best ways to do so are:
- Stop-Loss Order
- Trade-Profit Order
One important thing to note concerning stop-loss and trade-profit orders is that their usefulness depends on the broker that you register with. If you’ve registered with a faulty broker then neither your trade-profit or stop-loss order would be effective.
Another important factor to consider before placing either your stop-loss or profit-trade order is where you think the trade is going. If you think it’s going in a favorable position then place a trade-profit order but if you think it is going to go in an unfavorable position then place a stop-loss order.
A stop-loss order is when you’ve instructed the broker to sell a share or close out a position if it moves in an unfavorable direction. A stop-loss order is used to reduce the losses you can incur on a bad trade.
One of the major benefits of stop-loss orders is that they can reduce losses especially for traders who cannot constantly watch their positions. If you’re beginner it’s best you only use
Stop market orders which are much simpler to use than stop limit orders. You should also avoid using stop-loss orders with large positions. We also advise you to watch out for hidden fees and always check for confirmation of the orders to ensure they’ve gone through.
A trade-profit order is when you’ve instructed a broker to close out a position once it’s earned a specified profit. This order is another way for you to reduce losses and increase gains. When you’re creating your forex trading strategy, it’s important to consider trade-profit and stop-loss orders in order to reduce the risk and increase the reward. Just like stop-loss orders, trade-profit orders are a perfect for non-active traders who aren’t glued to their screen all day. We also recommend you check for hidden fees and confirm that each order has gone through successfully.
Used together, stop-loss and trade-profit orders can be highly effective tools for maximizing your profits. While both stop-loss and trade-profit orders have their advantages and disadvantages, they’re perfect for both new and experienced traders.