Trading Gold Choose a Stop Loss Gold Order
How to select you stop loss level the target stop loss should be based on various strategies depending on your type of gold trading method.
The three methods of selecting stop loss levels are:
Strategies and Methods of Setting Stop Loss Gold Orders in XAUUSD Trading
Traders using a gold trading system must have mathematical calculations that reveal where the order must be placed.
A Gold trader can also place a stop loss order according to the technical indicators used to set these orders. Certain technical indicators use mathematical equations to calculate where the stop loss order should be set so as to provide an exit point. These trading indicators can be used as the basis for setting these orders.
Traders also place these orders according to a predetermined risk to reward ratio. This method of setting is dependent upon certain mathematical equations. For example a ratio of 50 pips stop loss can be used by a Gold trader if the trade has the potential to make 100 pips in profit; this is a risk reward ratio of 2:1
Other gold traders just use a predetermined percentage of their total gold trading account balance.
To set a stop loss it is best to use one of the following methods:
1. Percentage of Gold trading account balance
This stop loss setting method is based on the percent of account balance that the gold trader is willing to risk.
If a gold trader is willing to risk 2% of account balance then the gold trader determines how far he will set the stop loss order level based on the position size that he has bought or sold.
Example:
If a gold trader has a $10,000 trading account and is willing to risk 2%
- If the gold trader buys 1 mini contract
1 pip = $1
Then setting at 2%
2% is $ 200
2. Setting Stop Loss XAUUSD Orders using Support and Resistance Levels
Another way of setting stop loss orders is to use supports and resistance levels, on the xauusd charts.
Given that stop loss orders tend to congregate at key points, when one of these levels is touched by the xauusd price, other gold orders are set off. Stop loss orders tend to accumulate just above or below the resistance or support levels, respectively.
A resistance or a support level should act like a barrier for the xauusd price movement, this is why they are used to set stop losses, if this barrier is broken the xauusd price movement can go towards the opposite direction of the original gold trade, but if this barriers (support and resistance levels) are not broken the xauusd price will continue moving in the intended direction.
Stop Loss Gold Order Level Setting using Resistance Level
Setting stop loss order above the resistance level
Stop Loss XAUUSD Order Level using Support Level
Setting stop loss order below the Support Level
3. Gold Trendlines
A Gold trend line can be used to set stop losses where the stop loss order is set just below the trend line. As long as the trend line holds the gold trader will be able to continue making profits while at the same time set this stop loss order that will lock his profit once the trend line is broken.
Setting stop loss order below the trend line
Example of where to set this stop loss order using Gold trend lines.
