Stop Loss Trading Order Summary: Points To Remember When Putting

The key to placing top loss orders in commodities trading isn't to set too close or too far & not exactly on the support or resistance areas.

A few pips just below support or above the resistance regions is the best place.

If you are going long (buying a commodity instrument), just look for a nearby support level which is below your entry point & set this order about 10 pips to 20 pips below that support level. The example illustrated and explained below show the level where a trader can set their stop loss orders just below the support level on a chart.

Support Level For Setting Stop Loss Trading Order Level For Buy Trade

If you are going short (selling a commodity instrument), just look for a nearby resistance level that is above your trade entry point & set this stop order about 10 pips to 20 pips above that resistance level. The example illustrated and explained below show the level where one can put their stop orders just above the resistance level on a chart.

Resistance Level For Setting Stop Loss Trading Order Level For Sell Trade

You can also use stop loss orders to lock in profits, Not Just for Preventing Losses

The advantage of a stop loss order is that you do not have to monitor on a daily basis how the commodities market is performing. This is especially handy when you're in a situation that prevents you from watching your positions for an extended period of time, or when you want to navigate to sleep after trading the whole day.

The disadvantage is that the commodities trading price at which you set these orders could be activated by a short-term fluctuation in commodities trading price. The key is picking a stop loss order percentage that allows commodities price to fluctuate within the day to day range while preventing the downside risks.

These orders are traditionally thought of as a way to prevent losses thus the name. Another use of these stop orders is to lock in the profits, in which case it is referred to as a trailing stop loss.

For a trailing stop order it is put at a percent level below the current market commodities trading price. This trailing level then shifted as the trade transaction unfolds. Using a trailing stop loss level allows you to let the profits run while at the same time ensures that should the market turn you will have locked in some of your profits.

These orders can also be used to eliminate risk if a trade position becomes profitable. If a trade transaction makes some reasonable gains then the stop loss can be moved to break even point, the place at which you opened buy, thereby ensuring that even if the trade position goes against you, you'll not make any loss, you will break even on that trade.

Trailing stop commodity orders are used to maximize and protect profit as commodities trading price rises and limit losses when the commodities trading price falls.

A good example is when you use the parabolic SAR Technical Indicator and keep moving your stop loss order to the parabolic SAR Indicator level.

Parabolic SAR Commodities Trading Technical Indicator for Setting Trailing StopLoss Trading Order in Commodity Trading

Another example is where a trader moves his stop loss by a specific number of pips after every few hours or after every hour or after every 15 min depending on the Commodity Trading chart timeframe which the trader is using.

In the example above the parabolic SAR Indicator which had a setting of 2 & 0.02 was used as the trailing stop loss for the above chart. The trader would have kept moving the trailing stop loss order level upwards after every SAR was drawn until the time when the Parabolic SAR Indicator was hit & the trend reversed.

ConclusionA stop loss order is a simple tool, yet so many traders fail to use it. Whether it's used to cap excessive losses or to lock in the profits, nearly all investing styles can benefit from this tool.

Points To Remember When Placing These Stop Loss Orders

Here are some important points to remember:

• Be careful with the points where you put these stop loss orders. If a commodity instrument normally fluctuates 20 points, you do not want to put your top loss order too close to that range else you'll be taken out by normal market volatility

• Stop Loss Trading Orders take the emotion out of a trading decisions & by setting one you set a predetermined point of exiting a losing trade, meant to control losses.

• Traders can always use indicators to calculate where to put these regions, or use the trading concepts of Resistance & Support to work out where to put these stop orders. Another good technical indicator used to set these stop loss orders is the Bollinger bands where traders use the upper & lower band as the limits of commodities trading price therefore putting these orders outside the bands.