Every day, thousands of traders in our Trading Office around the world use the Ppro8 platform to analyse securities, open trades, close trades, and manage risks. The platform was developed by our team and has been used for more than 20 years.
In this article, We will focus on the important topic of stop loss orders, what they are, their benefits, and what you should consider when placing such an order.
Buy & Sell Stop
In the marketplace, you can open buy and sell trades on securities at the immediate market place or you can program the chart to open trades at a future time.
For example, if a stock of a company is trading at $10 and you believe that a good buy signal will be triggered when the asset moves to $12, you can sit and wait for that to happen. Alternatively, you can tell the trading platform to initiate a trade when the level is reached even when you are not there.
In other words, a stop order is an order to open a trade when the price of an asset moves below or above a specific level.
A buy stop is an order to buy a security at a price above the current price while a sell stop is an order to sell a security at a price below the current price.
Benefits of using Stop Orders
The benefit of using this type of order type is that you don’t need to stay in front of your computer waiting for the signal to happen. Based on your analysis, the Ppro8 will initiate the trade itself.
In most cases, the Stop trades are often more profitable than market order trades.
Another type of stop order is an order to automatically end an unprofitable trade once a certain level is reached.
When you have a trade open, you can stay and watch it and when the loss reaches a certain point, you can end it. Alternatively, you can set a stop loss order which will stop the trade automatically even when you are not there.
This is a good risk management tool.
Trailing Stop Loss Order
Finally, there is a trailing stop loss order. This is an ordinary order but with a stop loss that is not at a fixed level. As the trade becomes profitable, the stop loss moves with it. As such, the profit is locked up so that in case of a reversal, the size of the loss is not very high.
How to Open a Stop Loss Order?
To open stop loss orders, you need to do a few things.
First, you need to find a security to trade. This should be an asset that you have a good understanding about.
Second, you should do your analysis. This analysis should be both technical and fundamental analysis. It will help you identify potential entry and exit positions.
Third, you should determine the maximum amount of money you are willing to take. A recommended way to do this is to calculate 2 or 3% of your funds. After doing this, you should place the stop loss at that amount.
Finally, you should monitor the trades closely.