Best Stop Loss Gold Order Strategy for Gold Trading
Stop Loss XAUUSD Order Example
Stop Loss Gold Order is a type of order placed after opening a gold trade that is meant to cut losses if the xauusd market moves against you in the opposite direction.
Stop Loss Gold Order is a pre-determined point of exiting a losing gold trade & it is meant to control losses in xauusd trading.
A stop loss order is an order placed with your gold broker which will automatically close your open gold trade order when the price of your open gold trade order reaches a predetermined xauusd price. When the set level is reached, your open gold trade is liquidated.
These gold orders are designed to limit the amount of money that trader can lose: by exiting the gold trade order if a specific xauusd price that is against the gold trade is reached.
For example, a trader might open a buy gold trade and put a stop loss of 20 pips, if the xauusd price moves against the trader by 20 pips the stop loss order will be filled and the gold trade will be liquidated thereby limiting the loss to 20 points (pips) - Setting Stop Loss Gold Order Techniques.
Regardless of what you might be told by other xauusd traders, there's no question about whether these stoploss orders should or should not be used - stop loss orders should always be implemented.
One of the most difficult things in gold trading is setting these stop loss orders - Best Stop Loss Gold Order Strategy - Best Stop Loss Gold Order Strategy for Gold Trading. Put the stop loss order too close to your entry price and you're liable to exit the gold trade due to random market volatility. Place the stop-loss order too far away and if you are on the wrong side of the gold trend, then a small trading loss could turn into a big loss.
Critics will point out several disadvantages of these stop loss orders: that by placing them you're guaranteeing that, should your open gold trade position move in the wrong direction, you'll end up selling at lower xauusd prices, not higher.
Skeptics will also argue that in setting stop loss orders you are vulnerable to exit a gold trade order just before the gold market moves in your favor. Most traders have had the experience of setting a these stoploss orders and then seeing the xauusd price retrace to that stop loss order level, or just below it, and then go in the direction of their original gold market trend analysis. What may have been a profitable gold trade instead turns into a xauusd trading loss.
Professional gold traders always use stop loss orders as these trade orders are an important part of discipline required to succeed in gold trading because stop loss orders can prevent a small loss from becoming a big loss. What's more, by diligently setting these stop-loss orders whenever you enter a gold trade position, you end up making this important decision at the point in time when you are most objective about what is really happening with the gold market, this is because the most objective gold technical analysis is done before opening a gold trade order. After entering the gold market a trader will tend to analyze the xauusd market differently because they have a bias toward one side of the xauusd market, the direction of their gold analysis - Best Stop Loss Gold Order Strategy for Gold Trading.
Unexpected gold economic news reports can come out of the blue and dramatically affect the xauusd price: this is why it is so important to have a stop loss order set for your open gold trade. It is best to cut gold losses early when a gold trade position is going against you, it is better to cut your gold losses immediately rather than waiting for the loss to become a big one. Again, if you set your stop loss orders when you are entering a gold trade, then that is when you are most objective as a trader - Best Stop Loss Gold Order Strategy.
Best Stop Loss Gold Order Strategy
A key gold question is exactly where to place this stop loss order. In other words, how far should you place this gold stop loss below your purchase xauusd price? Many gold traders will tell you to set a pre-determined - maximum acceptable loss per gold trade, an amount based on your gold account balance rather than use gold technical technical indicators for calculating where to place the stop-loss order - Best Stop Loss Gold Order Strategy for Gold Trading.
Professional money managers advice that you should not lose more than 2% of your gold account equity on any one single gold trade order. If you have $10,000 in gold trading capital, then that would mean the maximum loss you should set for any one gold trade order is $200 - Best Stop Loss Gold Order Strategy.
If you opened a gold trade then that would mean that you would limit your risk to no more than $200 for that specific gold trade. In which case you would set your stop loss order at 200 or the equivalent number of pips based on your gold position size of the gold trade that you've opened - Stop Loss Gold Order Example - Gold Stop-Loss Order - Stop Loss Gold Order Calculator. The topic of gold risk management is a wide topic and it is covered under learn xauusd trading money management strategies topics.
- XAUUSD Money Management Introduction - Factors to Consider When Setting StopLoss Gold Orders
- XAUUSD Money Management Methods - Stop Loss Gold Order Example - Gold Stop-Loss Order - Stop Loss Gold Order Calculator
Stop Loss XAUUSD Order Example
The most important question is how close or how far this stop loss order should be set from the xauusd price where you entered the gold trade. Where you set the stop-loss order will depend on several factors:
Since there are no rules cast in stone as to where you should set these stop loss orders on a gold chart, we follow general stop loss order setting guidelines used to help place these stop loss xauusd trade orders correctly.
Some of the general stop-loss order setting guidelines used are:
1. Risk Percentage - How much is a trader willing to lose on a single gold trade order. The general stop loss order setting rule is that a trader should never lose more than 2 percent of the total gold trading account capital on any one single xauusd trade order.
2. XAUUSD Market Volatility - gold market volatility refers to the daily xauusd price range movement of the gold that you are trading. If a xauusd price routinely moves upward and down in a range of 50 pips or more over the tutorial of the day, then you can not set a tight stop-loss when you open a gold trade. If you do, you'll be taken out of the gold trade position by the normal gold market volatility.
3. Gold Trading Risk to Reward Ratio - this is the measure of potential reward to risk calculated before opening a gold trade. If the gold market conditions are favorable then it is possible to comfortably give your gold trade more room. However, if the xauusd market is too choppy it then becomes too risky to open a gold trade order without a tight stop loss - then don't make the gold trade at all. The gold trading risk to reward ratio is not in your favor & even setting tight stoploss orders will not guarantee profitable results. It would be wiser to look for a better gold trade position to next time.
4. Gold Trade Position Size - if the gold trade position size opened is too big then even the smallest decimal xauusd price movement will be fairly large in risk percentage terms. This means that you have to set a tight stop loss for your gold trade which may be taken out more easily. In most cases it is better to adjust to a smaller gold trade position size so as to give your gold trade more space for xauusd price volatility movement, by setting a reasonable gold stop loss level for this stop loss order while at the same time reducing the gold risk for the xauusd trade transaction.
5. Gold Account Capital - If your xauusd trading account is under-capitalized then you will not be able to set your stop-loss orders accordingly, because you'll have a large amount of money that is invested in a single gold trade which will force you to set very tight stop loss orders. If this is the case, you should think seriously about whether you have enough capital to trade XAUUSD in the first place.
6. XAUUSD Market Trend Conditions - If the xauusd price is trending upwards, a tight stop might not be necessary. If on the other hand the xauusd price is choppy & has no clear gold trend direction then you should use tight stoploss order or not open any xauusd trades at all.
7. Gold Chart Time frame - the bigger the xauusd chart timeframe you use, the larger the stoploss order level should be. If you were a scalper gold trader your stop loss orders would be tighter than if you were a gold day trader or a gold swing trader. This is because if you are using longer xauusd chart time-frames & you figure out the xauusd price will be move upwards it doesn't make sense to set a very tight stop because if the xauusd price swings a little your open gold order will be hit.
Best Stop Loss Gold Order Strategy
The technique of setting stop loss orders that you choose will significantly depend on what type of gold trader you're. Most oftenly used method to determine where to set stop loss orders is - resistance and support areas. These gold support & resistance levels give good points for setting these stop loss orders as they are most reliable levels to set stoploss orders, because the support & resistance levels will not be hit many times.
Stop Loss XAUUSD Order Example
The method of how to set these stop loss orders that you select should also follow the stop loss order setting guidelines above, even if not all these guidelines apply to your gold strategy try to implement the guide-lines which will apply to your gold strategy depending on what type of trader you are.
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