Stop Loss
What is a Stop Loss?
A stop loss is a preset order that automatically closes a trade when the price moves against you to a certain level. It helps limit your losses and manage risk.
Stop Loss Example
Suppose you buy EURUSD at 1.10201, expecting the price to rise. You set a stop loss at 1.10001.
- If the price goes up, you may make a profit.
- If the price falls to 1.10001, your trade will close automatically, limiting your loss.
This simple feature makes stop loss one of the most important tools for risk management in trading.
Why is Stop Loss Important?
- Protects your trading account from large losses
- Removes emotional decision-making
- Allows you to plan your trades with clear risk levels
In short, a stop loss in forex or CFD trading is like a safety net that ensures you never lose more than you are prepared to.
Other Glossary Terms
S
- Spread
A spread is the small difference between an asset’s buy (ask) and sell (bid) prices, showing the cost of opening a trade and how brokers make money.
- Stop Loss Limit
A stop-loss limit is an order that triggers a limit order once a set stop price is reached, letting traders control losses but not guaranteeing execution beyond the limit.
- Support Level
A support level is a price zone on a chart where a downtrend tends to pause or reverse as buying pressure increases, acting like a floor where traders expect prices to bounce.
- Swap
A swap, or rollover, is the credit or fee applied to a CFD position held overnight, reflecting interest-rate differences, financing costs, and broker adjustments.
- Scalping
Scalping is a high-speed trading style where traders aim to capture small, frequent price movements within seconds or minutes, executing multiple quick trades for tiny, consistent gains.
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