How to Use Stop Loss Indices Orders in Indices Trading
How Do I Trade Indices and Use Stop Loss Indices Orders in Indices Trading?
Indices Trading select you stop loss level the target stop loss should be based on various strategies depending on your type of indices trading method.
The 3 techniques of selecting stop-loss levels are:
Strategies & Methods of Setting Stop Loss Stock Indices Orders in Indices Trading
Traders using a indices trading system must have mathematical calculations that reveal where the order must be placed.
A trader can also set a stop loss order according to the technical indices indicators used to set these orders. Certain technical indices indicators use mathematical equations to calculate where the stop loss stock index order should be set so as to provide an optimal exit point. These stock indices technical indicators can be used as the basis for setting these orders.
Traders also place these orders according to a predetermined risk to reward ratio. This technique of setting is dependent upon certain mathematical equations. For examples a ratio of 50 pips stop-loss can be used by a trader if the indices trade has the potential to make 100 pips in trading profit: this is a risk : reward ratio of 2:1
Other traders just use a predetermined percentage of their total indices trading account balance.
To set a stop loss it is best to use one of the following techniques:
1. Percent of Stock Indices trading account balance
This stoploss setting method is based on percentage of account balance that the trader is willing to risk.
If a trader is willing to risk 2% of indices trading account balance then the trader determines how far he will set the stop loss order level based on the trade size that he has bought or sold.
2. Setting Stop Loss Indices Orders using Support and Resistance Areas
Another way of setting stop loss stock indices orders is to use supports and resistance levels, on the trading charts.
Given that stop-loss orders tend to congregate at key points, when one of these levels is touched by the indices price, other stock indices orders are set off. Stop loss orders tend to accumulate just above or below the resistance or support levels, respectively.
A resistance or a support area should act like a barrier for stock indices price movement, this is why they are used to set indices stop losses, if this barrier is broken the stock indices price movement can go toward the opposite direction of the original indices trade, but if this barriers (support & resistance levels) are not broken the stock indices price will continue heading in intended direction.
Indices Stop Loss Order Level Setting using Resistance Level
Setting stop-loss order above resistance area
Indices Stop Loss Order Level using Support Level
Setting indices stop loss trading order below the Support Level
3. Stock Indices Trendlines
A Indices trend-line can be used to set stop-losses where the stop-loss stock indices order is set just below the trend line. As long as the trend line holds the trader will be able to continue making profits while at the same time set this indices stop loss order which will lock his profit once the trend line is broken.
Setting stop loss order below trendline
Example of where to set this stop-loss order using Indices trend lines.
How to Use Stop Loss Indices Orders in Indices Trading?
