A Forex trading stop order is used to mitigate losses faced by traders, by pushing them out of their position once losses are made or a losing trend is identified. When you have a stop at $50 for a security being traded at $65, if the price suddenly drops below $50, your position will be withdrawn immediately, allowing you to stay safe from losses.
The Importance Of Stop-Losses
A stop order is used to sell a commodity upon a certain price level being reached, just as it is used to avoid losses. These orders can be placed on short and long trades all the same. Apart from its most evident advantage – of keeping away losses, what it helps to do is barring your emotions out of trades. Many traders while Forex trading in Nepal have the tendency to get over-emotional over losses or even profits, and this leads to them trading in an increasingly rash manner.
Professionals always advise against letting emotions take the wheel while Forex Trading. Trading out of greed or anger, or the fear of losing more money only leads to further losses. So when you keep a stop order in place, it will do the work for you and keep you from crossing the line. Another advantage of employing stops is that it helps protect oneself against erratic market movements. What the future holds, only the future knows. You can’t predict how a market will move, so for traders who find capital management to be difficult, having a stop placed will help you avoid heavy losses.
Types Of Stops
A stop-loss can be of two types – static and trailing.
1) Static Stop-Loss:
Static stop orders are the normal ones, and much like their name suggests – they are static. Once placed, these stops can’t be moved. This is a huge advantage for traders who are just starting off and have difficulties managing their investments. With a static stop in place, you can trade your position without having to worry about losses finding their way in.
2) Trailing Stop-Loss:
A trailing stop is an upgrade to the static ones. These stop orders are more dynamic in nature and can be made to follow a particular price level you think you can risk; typically, these are placed at profit and breakeven points.
To succeed at Forex Trading In Nepal, a thorough understanding of stop-losses is necessary! The markets can get harrowingly volatile and throw your trades into losses. Avail the assistance of WesternFX – the leading Forex broker, and take to the skies! With our expert guidance, you will be able to land consecutive wins and achieve trading success in no time. Call us today to know more!
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