Stop Losses in Forex Trading

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Stop Losses in Forex Trading
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Index

1. Stop Losses in Forex Trading
2. Types of Stop-loss

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Stop Losses in Forex Trading

• The Stop Losses function is a valuable tool to
  safeguard the value of foreign currency trades.
• It is especially true when the price of the forex
  pair starts to move into negative territory.
• You simply set the stop-loss level, which
  determines the most you can lose on position if
  the price moves against you.

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• You should bear in mind that the stop-losses can
  work for you or against you in the online
  trading.
• While they protect against sudden movements in
  the price, they can result in fear based trading
  which is equally detrimental.

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• If you decide to maintain the narrow stop-losses
  and collect on winning trades too early, this
  will result in the incremental wins and losses.
• And there will be a loss of overall trading
  activity.

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Types of Stop-Loss

• If you are wondering how stop-loss can help you
  while you are trading, it is a good idea to
  understand the several different stop-loss tools
  and techniques.
• 1. Average True Range
• This stop-loss technique is used in many charting
  packages, and it factors volatility into the
  price of tradable instruments.

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• 2. Trailing Stop
• It is possible to secure your profit while
  limiting your risk, by using a trailing stop.
• It is a special type of stop-loss adjusts your
  stop level automatically when your position runs
  into profit, to lock in your gains.

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• As the price of the tradable instrument rises, so
  too does the stop-loss.
• But when the price falls beyond the stop levels
  your position is closed automatically as with a
  normal stop loss.

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• 3. Guaranteed Stops
• This stop-loss allows you to limit the risk on
  trades even when market gaps occur.
• A Guaranteed Stop always represents the maximum
  that you can lose on a position, and there is a
  small premium for the absolute risk protection.

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Thank You