Indices Stop Loss Order Placement

Stop Loss Order

Stop Loss Order is a type of order that's set after opening a trade that's intended to cut losses if the trading market shifts against you.

Stop Loss Order is a pre-determined point of exiting a losing trade & it's meant to control losses in stock indices trading.

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

These orders are intended to restrict the sum of money that trader can lose: by exiting the trade if a specific price that's against the trade is reached.

For example, a trader might open a buy trade & put a stop loss of 20 pips, if the price moves against the trader by 20 pips the stop loss order will be filled and the trade will be liquidated thereby limiting the loss to 20 points (pips) - Indices Stop Loss Order Strategy PDF.

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

One of the more challenging things in in Indices is setting these stop loss orders - Indices SL Order Placement - Indices Stop Loss Order Strategy Day Trading. Put the stop loss order too close to your entry price and you're liable to exit the trade due to random market volatility. Place the stop loss order too far away and if you are on the wrong side of the trend, then a small loss could turn into a big loss.

Critics will point out several disadvantages of these stop loss orders: that by placing them you're guaranteeing that if should your open trade position move in wrong direction, you'll end up selling at lower prices, not higher.

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

Experienced traders always use stop loss orders as they are an important part of discipline required to succeed in indices because stop loss orders can prevent a small loss from becoming a big trading loss. What's more, by purposefully putting these stop loss orders whenever you enter a trade position, you end up making this important decision at the point in time when you're most objective about what is really happening with market, this is because the most objective technical analysis is done before opening a trade. After entering the trading market a trader will tend to interpret the trading market differently because they have a bias toward one side of the trading market, the direction of their stock analysis - Indices SL Order Strategy Day Trading.

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

Stop Loss Order Strategy Day Trading

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

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

If you opened a trade then that would mean that you would limit your risk to no more than $200 for that particular trade. In which case you would set your stop loss order at 200 or equivalent number of pips based on your trade position size of the trade that you've opened - Indices SL Order Market Order - Indices Stop Loss Order. The topic of trading risk management is a wide topic & it's covered under learn indices trading money management tutorials.

• Indices Money Management Introduction - Factors to Consider When Setting StopLoss Orders
• Indices Money Management Techniques - Indices SL Order Market Order - Indices Stop Loss Order

Stop Loss Order

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

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

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

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

2. Indices Market Volatility -market volatility refers to the daily price range movement of the trading indices instrument that you're trading. If a trading indices instrument routinely moves up & down in a range of 50 pips or more over the course of the day, then you can't set tight stop loss when you open a trade. If you do, you'll be taken out of the trade transaction by the normal market volatility.

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

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

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

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

7. Indices Chart Timeframe - the bigger the chart time frame you use, the larger the stop-loss order level should be. If you were a scalper trader your stop loss orders would be tighter than if you were a day trader or a swing trader. This is because if you're using longer chart timeframes and you determine the trading price will be move upwards it doesn't make sense to set a very tight stops because if the trading price swings a little, your open order will be hit.

Stop Loss Order Strategy Day Trading

The technique of setting stop loss orders that you choose will significantly depend on what type of trader you're. The most oftenly used strategy to determine where to set stop loss orders is - resistance & support areas. These support & resistance areas give good points for setting these stop loss orders as they are the most reliable levels to set stop loss orders, because the support and resistance levels won't be hit many times.

Stop Loss Order

The technique of how to set these stop loss trading orders that you choose also should follow the stop loss order setting guidelines above, even if not all these guide-lines apply to your strategy try to implement the guide-lines which will apply to your strategy depending on what type of trader you're.

Indices SL Order Placement - Indices Stop Loss Order Strategy Day Trading - Indices Stop Loss Order Strategy PDF - Indices SL Order Market Order - Indices Stop Loss Order