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    Thread: Do you use stop loss as stop out?

    1. #41
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      Default Re: Do you use stop loss as stop out?

      Stop loss is important but when a forex trader now uses this as a stop out, that is very bad because there are many things we don't understand about the forex market yet, stop loss is the limitations that makes your account to lose only a certain amount of money per time but when this is now used for the wrong purpose, ones account is bound to be lost, many reasons exist why the stop loss is applied to he the stop out level, one is greed, when the forex trader is greedy, he will tend to ignore the need for money management and in the process forget about using stop loss, in this case, there is no way he can avoid his account from margin call, that is highly unprofessional.


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    3. #42
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      To limit risk on a trade you need an exit plan. When a trade goes against you, a stop loss order is part of your exit plan. A stop loss is an offsetting order which exits your trade if a certain price level is reached.

      Assume you buy the EURUSD forex pair at 1.1015, expecting it to rise. With this expectation, you place a stop loss at 1.1005 because your forex strategy indicates that if the price falls to this level it could go even lower before it goes higher. The stop loss order caps your risk at 10 pips per lot traded...theoretically.

      When using stop loss orders there are a few things you should know though. While using them is always recommended, how they are used varies from trader to trader. Here are ways to use a stop loss order, stop loss order types and the pros and cons of using these types of stop loss orders.
      Regular and Worst Case Stop Loss

      There are two common ways traders use stop loss orders:

      A stop loss is used to exit all trades. The trader sets a stop loss on each trade at a price level they wish to exit a losing trade at. This is a regular stop loss and is used as the only exit plan for a losing trade.
      A trader manually exit trades as opportunities arise and conditions change, but may set a worst case stop loss order to limit losses in case a manual exit isn't possible or doesn't occur.

      The stop loss, whether regular or worst case, serves to get you out of a position if you're disconnected from your broker because of an internet or power age (assuming your order made it to your broker before the outage occurred), or you need to run to the bathroom but don't want to exit your trade quite yet.

      Using stop losses on a regular basis is a good idea as it forces the trader to be disciplined in getting out of losing trades. At the minimum, a worst case stop loss should always be used.

      Stop loss orders execute automatically, which is often a good thing during a losing trade. Humans have a tendency to hang on to losing trades (loss aversion), so having a stop loss in place assures the trader limits all losses to a small amount of account capital.
      Stop Loss Market Order

      A regular or worst case stop loss is how a stop loss is used. Stop loss order types—market or limit—are the types of stop loss orders typically used.

      The most common type of stop loss order is a Stop Loss Market Order. When the price of an asset reaches your stop loss price, a market order is automatically sent by your broker to close the position at the current price (whatever it may be).

      Under most conditions, in a stock or asset with lots of volume (Look for These Qualities in a Day Trading Stock), your stop loss order will "fill" at, or very close to, the stop loss price originally set. In fast-moving market conditions (news events, for example), or a very thinly traded stock or asset, where the trade is actually exited could be quite different than the expected (stop loss) price.

      This is called slippage and can result in a worse price than expected. It's one of the cons of trading with a stop loss market order. Some traders prefer to manually exit trades, as they believe they can manually exit when conditions are favorable, as opposed to a stop loss order automatically exiting their position in unknown conditions. This is why some traders opt to use only a worst case stop loss; they can exit most of their positions manually with hopefully less slippage. The flip side is that if trading liquid market slippage isn't a major concern anyway, so under most conditions using a stop loss to exit losing trades works well.
      Stop Loss Limit Order

      Another stop loss order type is the Stop Loss Limit Order. When the price of an asset reaches your stop loss price a limit order is automatically sent by your broker to close the position at the stop loss price, or better. Unlike the stop loss market which will close the trade at any price (current price), the stop loss limit order will only close it at the stop loss price or better. This eliminates the slippage problem (which isn't really a problem most of the time) yet creates a bigger one...it doesn't get you out of the trade when the price is moving aggressively against you.



      If you went long a stock at $50, placing a stop loss limit order at $49.90, and the price moves to $49.88 (no one willing to buy your shares at $49.90) you need to hope someone now fills your limit order at $49.90. If the price keeps dropping without filling your order your loss grows, getting bigger than originally intended. This eliminates the point of a stop loss order—to get you out of a losing position.


    4. #43
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      Default Re: Do you use stop loss as stop out?

      It is not wise to use stop loss as a stop out strategy, that is just saying that we have acknowledged our account as a demo account without any hopes of trading it in a long time, this is not good at all, whenever we are trading without control of the exposure that we will face if our analysis is wrong, then we are ultimately gambling in this market which is not a good approach.

      The decision to apply a stop loss is good, but when we have now gone a step ahead to use this same stop loss as a stop out, what we have invited is a margin call, which is not our expectation from the moment we began trading, Forex without capital is useless.
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    6. #44
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      Default Re: Do you use stop loss as stop out?

      When trading and we decide to use the stop loss as a stop out strategy, that means we are trading dangerously without money management, anyone that does this method of trading is ultimately going to be experiencing constant losses of everything that he has put in for trading, this is not an appropriate strategy because you will be frustrated from getting nothing for the efforts that you have put into trading.

      Stop loss should be small, it is not to be used as a margin call tool because the purpose would have been defeated already, trading stop loss is good, you don't need to engage every cent in your account as a risk factor into the market, this is a bad idea which won't take you far in this business at all.


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    8. #45
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      Default Re: Do you use stop loss as stop out?

      In my own case, I use a stop loss most of the time because it is very important for that it limits my loss. Opening a trade without a stop loss is quite suicidal most especially if you are not monitoring your trades most of the time. I remember the flash crash that took place last week and I know that many traders lost money as a result and if a trader does not have a stop loss, he could get a margin or even a negative balance which can be catastrophic. So stop loss must be used in every trade you open even if you are sure that the market will move in your direction but at least let your stop loss be there because anything can happen in the forex market. If you are in a trade and the trade has gone a bit far against, exercising patience for it to come back to your entry point can be suicidal because it may never come back to your entry point.


    9. #46
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      Default Re: Do you use stop loss as stop out?

      Yes, I use stop-loss orders as stop out because to get good performance and as the risk management rules I use stop loss. Beside this, stop loss is the good tools to save our money from big loss in this forex market where as stop loss order help us to protect our account against worst-case scenarios -in the scene of blow down account. We should choose the minimul risk than the biggest risk on blow down the account. Most of the professional and expert traders use stop loss as stop out their trading account and to survive for a long time in the forex market and if one's can stand here then there is the possibility to make more money. For this, we should use stop loss with the good position as it does not become 2-3% risk.


    10. #47
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      Default Re: Do you use stop loss as stop out?

      Dear I never use stop loss because I think this is the main cause of loss. When we use stop loss and our trade hits it and closed. After sometime market reversed in favour of closed trade but the trade has been closed and we got upset. Therefore I don't use stop loss


    11. #48
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      Default Re: Do you use stop loss as stop out?

      We should stop abusing the terms of the financial market trading. The stop loss and stop out are not the same thing, the stop loss is used as part of the precautionary measures against too much losing, the traders will set it directly on their trading chart. If the market price now gets to that level of the stop loss, the market will close the trade for the trader in order not to acquire more losses that are not convenient for that trader.

      But in the other hand, the stop out is a certain level of total account ruin, traders will first pass through the stage of margin call before the stop out will occur. If the market did not bounce back in favour of the trader after a much while of margin call, then stop out will occur after too much draw-down in the account of the trader. The stop out however is expressed with percentage, it is the in term and conditions of every broker.


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