Why is Stop Loss so Important?

Why is Stop Loss so Important?

Once you make a trade, there are so many things to be taken care of. And making sure that you have applied Stop Loss to your trade is an important part.


 

What is Stop Loss?

A stop-loss order is placed by a trader on trade to limit the loss. As the name suggests, a Stop-loss order puts an end to the trade when it reaches the particular amount of loss determined by the trader. It helps investors to prevent large and uncontrollable losses. Not using the Stop loss order while trading is something that is not recommended to any trader. Not using stop-loss can lead to uncontrollable losses and one may end up wiping out the entire account just in a short period of time. 

Types of Stop-loss Orders. 

Volatility Stop: Although Volatility is an important aspect of trading, it can also lead to major losses in investment. Volatility refers to the change in price over a short period of time. Volatility stop-loss order triggers when there is a large price change in the investment being made. This leads to controllable losses and reduces the loss margin. 

Time Stop: As the name suggests, this type of stop loss ends the trade after a specific period of time. Time stop-loss is majorly used by intra-day traders best Forex Trading company. Traders apply a time-stop at the beginning of the day and end their trade at dawn. 

 Percentage Stop: In this type of stop-loss, the trader determines the percentage of risk he/ she is willing to take. Suppose if a trader invests $10,000 and sets a percentage stop-loss of 2%. Then the trade will automatically shut if the trader faces a loss of $200. 

Why should you use Stop-loss while making your trade? 

Control over Loses: The key benefit of stop-loss order is control. A trader can determine the loss he/ she can bear and then control it. 

No Daily Monitoring: One benefit of using a stop-loss order is that traders don't need to monitor your trades daily. One just needs to set up the preferable stop-loss order and the trade will automatically stop once stop-loss is triggered. 

No Extra Charges: Another important benefit of a stop-loss order is that it costs nothing to implement. 

Stop-loss orders do not guarantee that one will make a profit, but it is always advisable to apply stop-loss as not using it can lead one to lose just as much money as they could.  To trade-in crypto with No Minimum Deposit, Swap-free, and Commission-free Trading, and with No Deposit Charges, open your account here go ahead and get started with Capital Sands Read More.

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