The Meta Trader 4 platform has a number of features that help traders execute trades with less financial risk. Keep a tight check on your transactions and margins as the first and most important stage. Stop Loss and Take Profit orders are commonly used by traders to manage their positions without having to constantly monitor them. Another way to manage trading risk is to use limit and stop orders. The trading company's stated margin call and liquidation level will be activated in the worst-case scenario.
What is the Difference Between a Stop Loss and a Take Profit?
Stop Loss (S/L) and Take Profit (T/P) limit orders precisely define the price level at which a position is automatically closed to prevent losses or lock in profits. This tool is commonly used by traders to manage their trading risks. Using a S/L is one approach to prevent margin calls and liquidation of open positions. To be effective, a trade's stop loss should be higher than the margin call threshold.
S/L and T/P traders don't have to worry about manually completing trades, trading emotionally, or being stuck at their computer waiting for a precise price. Traders must be knowledgeable about the characteristics of each market they trade. Certain marketplaces fluctuate from day to day. Shares are an excellent example of this; they frequently change by more than 1% from one session to the next.
Traders must account for this in their S/L and T/P since the S/L or T/P will be filled at the next available price if the market gaps above or below their target price. If the price starts below the trader's S/L price, the trader is likely to lose more money. S/L and T/P orders can be placed using market analysis, trend patterns, and a variety of indicators.
When the price of a security begins to move in an unprofitable direction, this order is used to minimize losses. If the security price falls below this level, the position will be automatically closed. These orders are always associated with a pending order or an open position. They can only be placed with a brokerage firm's market or pending order. The terminal uses the BID price for long positions to ensure that the order's parameters are met (the order is always set below the current BID price), as well as the ASK price (the order is always set above the current ASK price). Trailing Stop can be used to automate a price-following Stop Loss order.
A Take Profit order is used to profit when the price of a security hits a certain threshold. The position is closed after this instruction is followed. It's always associated with an open position or a pending order. Only a market or pending order can be used in combination with this order. The terminal uses the BID price for long positions to ensure that the order's terms are met (the order is always set above the current BID price), as well as the ASK price for short positions (the order is always set below the current ASK price).
Setting Stop Loss and Take Profit
The first and most straightforward way to add a Stop Loss or Take Profit to your trade is to do so as soon as you place a new order.
Simply put your desired price level in the Stop Loss and Take Profit areas. Remember that Stop Loss levels are automatically performed when the market moves against your position thus the name, and Take Profit levels are automatically triggered when the price reaches your specified profit target. This implies you can set your Stop Loss level lower than the current market price and your Take Profit level higher than the current market price.
Remember that a Stop Loss (SL) or Take Profit (TP) is always associated with an open position or pending order. Once your trade is open and you're monitoring the market, you can alter both. It's a stop-loss order for your market position, but it's not required to establish a new position. You can always add them later, but we strongly advise that you always protect your positions.
The SL/TP lines will display on the chart once you've input your SL/TP values. You may also easily and rapidly change the SL/TP levels this way. This can also be done through the bottom-most ‘Terminal' module. Simply right-click on your open position or pending order and select ‘Modify or delete order' to add or modify SL/TP levels.
Users can now enter/modify SL/TP by the precise market level, or by defining the points range from the current market price, in the order modification window.
Stop Losses are used to reduce losses when the market goes against you, but they can also be used to lock in winnings. While this may appear counterintuitive at first, it is actually rather simple to comprehend and master. Let's imagine you've opened a long position and the market is now moving in your favor, making your trade profitable. Your original Stop Loss, which was set below your open price, can now be adjusted to your open price (to break even) or above the open price (to make a profit) (so you are guaranteed a profit).
Users can use a Trailing Stop to automate this process. This can be a very valuable tool for risk management, especially when price movements are rapid or you can't keep an eye on the market all of the time. When the trade becomes lucrative, your Trailing Stop will automatically follow the price, retaining the previously set distance.
Following the example above, keep in mind that before your profit can be guaranteed, your trade must be making a profit large enough for the Trailing Stop to climb above your open price.
Trailing Stops (TS) are tied to your open positions, however it's crucial to remember that in order for a trailing stop to be effectively performed on MT4, the platform must be open.
To set Trailing Stop right-click the open position in the ‘Terminal' window and select the Trailing Stop menu. Enter your chosen pip value for the distance between the TP level and the current price.
Your Trailing Stop has been enabled. This means that if prices move to the profitable market side, TS will automatically adjust the stop loss level to match the price. You can quickly disable your Trailing Stop by selecting ‘None' from the Trailing Stop menu. Simply pick ‘Delete All' to immediately disable it in all open spots.
The Meta Trader 4 platform includes a number of tools that can help traders execute trades with minimal risk. Keep a tight check on your transactions and margins as the first and most important stage. Stop Loss and Take Profit orders are commonly used by traders to manage their positions without having to constantly monitor them. Another way to manage trading risk is to use limit and stop orders.
Stop Loss (S/L) and Take Profit (T/P) limit orders precisely define the price level at which a position is automatically closed to prevent losses or lock in profits. This tool is commonly used by traders to manage their trading risks. Using a S/L is one approach to prevent margin calls and liquidation of open positions. To be effective, a trade's stop loss should be higher than the margin call threshold. Please visit our website, Instaforex, for more information.
Last edited by reyann1115; 03-07-2021 at 08:32 PM.
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