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Indices Stop-Loss Order Definition

Stop Loss Indices Trading Order Management

Stop Loss Indices Trading Order is a type of order placed after opening a indices trade that is meant to cut losses if the indices market moves against you.


Stop Loss Indices Trading Order is a predetermined point of exiting a losing indices trade and it is meant to control losses in stock indexes trading.


A indices stop loss trading order is an order placed with your indices broker that will automatically close your open indices trade transaction when the stock indexes price of your open trade order reaches a predetermined indices price. When the set level is reached, your open indices trade transaction is liquidated.


These stock indices orders are designed to limit the amount of money that one can lose; by exiting the indices trade transaction if a specific stock indexes price that is against the trade is reached.


For example, a indices trader might open a buy indices trade and put a stop loss of 20 pips, if the stock indexes price moves against the trader by 20 pips the indices stop loss trading order will be filled and the transaction will be liquidated thereby limiting the loss to 20 points (pips) - Indices Stop Loss Trading Order Definition.


Regardless of what you may be told by other stock indexes traders, there is no question about whether these indices stop loss trading orders should or should not be used - indices stop loss trading orders should always be used.


One of the most difficult things in indices trading is setting these indices stop loss trading orders - Indices Stop-Loss Order Definition - Stop-Loss Order Example Indices Trading. Put the indices stop loss trading order too close to your entry stock indexes price and you are liable to exit the indices trade due to random indices market volatility. Place the indices stop loss trading order too far away and if you are on the wrong side of the indices trend, then a small loss could turn into a large loss.


Critics will point out several disadvantages of these indices stop loss trading orders; that by placing them you are guaranteeing that, should your open indices trade position move in the wrong direction, you will end up selling at lower indices prices, not higher.


The skeptics will also argue that in setting indices stop loss trading orders you are vulnerable to exit a indices trade transaction just before the indices market moves in your favor. Most indices traders have had the experience of setting a these indices stop loss trading orders and then seeing the stock indexes price retrace to that indices stop loss trading order level, or just below it, and then go in the direction of their original indices market trend analysis. What might have been a profitable indices trade position instead turns into a indices loss.


Experienced indices traders always use indices stop loss trading orders as they are an important part of the discipline required to succeed in indices trading because indices stop loss trading orders can prevent a small loss from becoming a large loss. What's more, by diligently setting these indices stop loss trading orders whenever you enter a indices trade position, you end up making this important decision at the point in time when you are most objective about what is really happening with the indices market, this is because the most objective indices technical analysis is done before opening a indices trade transaction. After entering the indices market an investor will tend to analyze the stock indexes trading market differently because they have a bias towards one side of the stock indexes trading market, the direction of their indices analysis - Stop-Loss Order Example Indices Trading.



Unexpected indices economic news can come out of the blue and dramatically affect the indices price; this is why it is so important to have a indices stop loss trading order set for your open indices trade. It is best to cut indices losses early when a indices trade position is going against you, it is best to cut your indices losses immediately rather than waiting for the loss to become a big one. Again, if you set your indices stop loss trading orders when you are entering a trade, then that is when you are most objective as a indices trader - Indices Stop-Loss Order Definition.


Indices Stop-Loss Order Definition

A key indices question is exactly where to place a this indices stop loss trading order. In other words, how far should you place this indices stop loss below your purchase indices price? Many indices traders will tell you to set a predetermined - maximum acceptable loss per indices trade, an amount based on your indices trading account balance rather than use indices technical indicators for calculating where to place the indices stop loss trading order - Stop-Loss Order Example Indices Trading.


Professional money managers advice that you should not lose more than 2% of your indices trading account equity on any one single indices trade transaction. If you have $10,000 in indices trading capital, then that would mean that the maximum loss you should set for any one indices trade transaction is $200 - Indices Stop-Loss Order Definition.


If you opened a indices trade then that would mean that you would limit your risk to no more than $200 for that particular indices trade. In that case you would set your indices stop loss trading order at 200 or the equivalent number of pips based on your indices position size of the indices trade that you have opened - Indices Stop Loss Trading Order Meaning - Stop Loss Indices Trading Order Management - Indices Money Management. The topic of indices risk management is a wide topic and it is covered under learn indices money management topics.





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Stop Loss Indices Trading Order Management

The most important question is how close or how far this indices stop loss trading order should be set from the stock indexes price where you entered the indices trade position. Where you set the indices stop loss trading order will depend on several factors:


Since there are no rules set in stone as to where you should set these indices stop loss trading orders on a indices chart, we follow general indices stop loss trading order setting guidelines used to help place these indices stop loss trading orders correctly.



Some of the general indices stop loss trading order setting guidelines used are:


1. Risk Percent - How much is a indices trader willing to lose on a single indices trade transaction. The general indices stop loss trading order setting rule is that a indices trader should never lose more than 2 percent of the total indices trading account capital on any one single indices trade transaction.


2. Stock Indexes Market Volatility - indices market volatility refers to the daily stock indexes price range movement of the indices instrument that you are trading. If a indices instrument routinely moves up and down in a range of 50 pips or more over the course of the day, then you cannot set a tight stop loss when you open a indices trade. If you do, you will be taken out of the indices trade position by the normal indices market volatility.


3. Indices Trading Risk to Reward Ratio - this is the measure of potential reward to risk calculated before opening a indices trade. If the indices market conditions are favorable then it is possible to comfortably give your indices trade more room. However, if the stock indexes trading market is too choppy it then becomes too risky to open a indices trade transaction without a tight stop loss - then don't make the indices trade at all. The indices trading risk to reward ratio is not in your favor and even setting tight indices stop loss trading orders will not guarantee profitable results. It would be wiser to look for a better indices trade position to next time.


4. Indices Trade Position Size - if the indices trade position size opened is too big then even the smallest decimal stock indexes price movement will be fairly large in risk percentage terms. This means that you have to set a tight stop loss for your indices trade which may be taken out more easily. In most cases it's better to adjust to a smaller indices trade position size so as to give your indices trade more space for fluctuation, by setting a reasonable indices stop loss level for this indices stop loss trading order while at the same time reducing the indices risk for the indices trade.


5. Indices Trading Account Capital - If your stock indexes trading account is under-capitalized then you will not be able to set your indices stop loss trading orders accordingly, because you will have a large amount of money invested in a single indices trade position which will force you to set very tight indices stop loss trading orders. If this is the case, you should think seriously about whether you have enough capital to trade Stock Indexes in the first place.


6. Stock Indexes Market Conditions - If the stock indexes price is trending upwards, a tight stop may not be necessary. If on the other hand the stock indexes price is choppy and has no clear indices market trend direction then you should use a tight stop loss or not open any stock indexes trades at all.


7. Indices Trading Chart Time frame - the bigger the stock indexes chart time frame you use, the bigger the indices stop loss trading order level should be. If you were a scalper indices trader your indices stop loss trading orders would be tighter than if you were a indices day trader or a indices swing trader. This is because if you are using longer indices chart time frames and you determine the stock indexes price will be move up it does not make sense to set a very tight stop because if the stock indexes price swings a little your open stock indices order will be hit.


Indices Stop-Loss Order Definition

The method of setting indices stop loss trading orders that you choose will greatly depend on what type of indices trader you are. The most commonly used method to determine where to set indices stop loss trading orders is - resistance and support levels. These indices support and resistance levels give good points for setting these indices stop loss trading orders as they are the most reliable levels to set indices stop loss trading orders, because the support and resistance levels will not be hit many times.


Stop Loss Indices Trading Order Management

The method of how to set these indices stop loss trading orders that you choose should also follow the indices stop loss trading order setting guidelines above, even if not all these guidelines apply to your indices trading strategy try to implement the guidelines that will apply to your indices trading strategy depending on what type of indices trader you are.

Indices Stop-Loss Order Definition - Stop-Loss Order Example Indices Trading - Indices Stop Loss Trading Order Definition - Indices Stop Loss Trading Order Meaning - Stop Loss Indices Trading Order Management - Indices Money Management

 

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