Stop Loss EA

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ForexTrailer.com
Popular Stop Loss EA Exit Strategies
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Importance of Stop Loss EA

• It lies in its ability to help prevent
  excessive losses by automatically closing a trade
  once a preset level has been reached. The level
  of a stop loss is usually fixed at a price below
  the buying price once a trader places a buy
  order.

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• Conversely, the stop loss is fixed at a level
  higher than the selling price when a sell order
  is set off. It should, however, be noted that the
  exit strategy a trader chooses must be in sync
  with his trading system and entry strategies.

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• When a breakout system or a contrarian system
  is used, the stop loss EA must not be large so as
  to ensure that once a trade turns bad, the trade
  is exited automatically. When a trader uses the
  trending system, the level of stop loss could be
  set larger to allow the trader more time to
  trade.

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• The aim of setting the stop loss is to minimize
  a trader's loss in any single Forex trade.
  However, there are different types of stops that
  could be brought into a trading system.

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• Initial Stop and
• Trailing Stop

- two of the stop loss EA strategies.
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Initial Stop

• -is set at the beginning of every trade, and
  it is very useful in estimating the size of the
  position that would be proper for trading.
  Initial stop spells out the maximum loss that a
  trader will take on any trade.

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Trailing Stop

• -is a product of the market movements, and its
  usage lies in assisting a trader secure some
  level of profits whenever trading becomes
  favourable. This strategy works in such a way
  that, as the trend builds up, the price movements
  is trailed by the stop so that should there be a
  trend reversal, the profits realized is preserved.

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Some of the Stop Loss EA Strategies

• Moving average trailing stop
• Two bar trailing stop
• Parabolic SAR trailing stop

• Channel trailing stop
• Average true range trailing stop

Average true range trailing stop, otherwise known
as ATR indicator, is mostly used by traders who
follow trend or turtle traders for ascertaining
how volatile the market is so as to enable them
protect their profit by fixing the stop loss far
from a highly volatile level. Channel trailing
stop is also popularly used among the earlier
mentioned sets of traders - trend following
traders and turtle traders.
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• It is a necessary thing for stop loss EA
  strategies to be decided based on the dynamics of
  the market. And when we talk about dynamics of
  the market, we mean the prevailing conditions of
  the market. It is very important to take this
  market dynamics into cognizance when planning for
  a trade as it would give a trader an idea of
  things to do so that he does not close his trade
  prematurely when there are opportunities for more
  profits to be made.

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