Indices Stop Loss Trading Order Trigger Indices Price
The most important question about setting your indices stop loss (SL) order is how close or how far the stop loss stock indices order should be set from the stock indices price where you entered the position. Where you set this stop loss order depends on several factors:
Since there are no indices rules set in stone as to where you should place your stop loss stock indices order, we follow general guidelines used by Indices traders to help them calculate where to place this stop loss order correctly.
Some of the general guidelines used to set indices stop loss trading orders are:
1. Percent Risk Per Indices Trade - How much a trader is willing to lose on a single indices trade. The general trader rule is that a trader should never lose more than 2 percent of the total trading account capital on any single indices trade.
2. Stock Indices Market Volatility - this refers to the daily stock indices price range of stock indices price movement. If a indices price movement of 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 indices stop loss trading order. If you do, you may be taken out of the open indices trade position by the normal indices market volatility.
3. Indices Risk to Reward ratio - risk reward ratio this is the measure of potential reward to risk. If the indices market conditions are favorable then it is possible to comfortably give your indices trade more room when setting stop loss stock indices orders. However, if the Indices market is too choppy it then becomes too risky to trade indices without a tight stop loss order then do not make the trade at all. The risk to reward ratio is not in your favor and even setting a tight stop loss will not guarantee profitable results. It would be wiser to look for a better indices trading to trade at another time.
4. Indices Position Size - if the indices position size traded is too big then even the smallest decimal stock indices price movement will be fairly big in risk percentage terms. This means that as a trader you have to set a tight stop loss stock indices order which may be taken out more easily by the stock indices trading market. In most cases it's better to adjust to a smaller indices position size in order to give your indices trade more space for fluctuation, by setting a reasonable stop loss while at the same time reducing the risk percent per trade.
5. Indices Trading Capital - If your stock indices trading account is undercapitalized then you will not be able to set your stop loss stock indices orders accordingly, because you will have a large amount of your indices capital invested in a single indices trade position which will force you to set tight stop losses. If this is the case, you should start thinking seriously about whether you have enough trading indices capital to trade the indices market in the first place.
6. Stock Indices Market Trend Conditions - If the indices market is trending upwards, a tight stop loss order might not be necessary. If on the other hand the indices market trend is range bound and has no clear direction then you should use a tight indices stop loss trading order or not trade at all.
7. Stock Indices Chart Time Frame - the bigger the stock indices chart timeframe you trade, the bigger the stop loss level should be. If you were a scalper indices trader then your stop loss stock indices orders would be set tighter than if you were a indices day trader or a indices swing trader. This is because if you are a indices swing trader and you determine the stock indices price will move up it does not make sense to set a very tight indices stop loss trading order because if the indices market swings a little your tight stop loss stock indices order will be hit.
The method of setting a indices stop loss (SL) order that you choose will significantly depend on what type of trader you are. The Method of how to set a stop loss stock indices order, that you choose should also follow the above guidelines, and as a trader you should apply these guideline to your Indices Trading Method.
