Setting Stop Loss Formula

StopLoss Order Example

Stop Loss Order is a type of order which is set after opening a gold trade that's meant to cut losses if the market trend goes against you.

Stop Loss is a pre determined point of exiting a losing trade & it's meant to control losses in xauusd.

A stoploss is an order set with your broker which will automatically close your open trade when price of your open trade order reaches a pre-determined price. When the particular level is attained, your open trade is closed out.

These gold orders are meant to limit the sum of money which trader can lose: by exiting the trade if a specific price that's against the trade is reached.

For example, one may open a buy trade and put a stop loss of 20 pips, if the price moves against the trader by 20 pips the stop-loss will be filled & the trade will be liquidated thereby limiting loss to 20 points (pips) - Stop-Loss Order Calculator Gold.

Regardless of what you may be told by other traders, there's no question about if these stop losses should or shouldn't be used - stop losses should always be used.

One of the most complex things in gold trading is setting these stop losses - Stop Loss Order - Setting Stop Loss Order Formula. Put the stop loss order too close to your entry price & you are liable to exit the trade due to random market volatility. Place the stop-loss too far away and if you are on the wrong side of the trend, then a small loss could turn into a large loss.

Skeptics will point out several disadvantages of these stop loss orders: that by placing them you're guaranteeing that, should your open trade transaction move in the wrong direction, you will end up selling at lower prices, not higher.

Skeptics also will argue that in setting stop losses you are vulnerable to exit a xauusd trade just before the market moves in your favor. Most traders have had the experience of setting a these stoploss orders and then seeing price retrace to that stop-loss level, or just few points below it, and then go in direction of their original market trend analysis. What may have been a profitable gold trade transaction instead turns into a gold loss.

Experienced traders always use stop losses as these trade orders are an important part of the discipline required to succeed in gold because stop losses can prevent a small loss from becoming a big loss. What's more, by diligently placing these stop losses whenever you enter a gold trade position, you end up making this important decision at the point in time when you're most objective about what is really happening with the market, this is because most objective trading analysis is done before opening a gold trade. After entering market one will tend to interpret the market differently because they now are biased towards one side of the market, the direction of their analysis - Setting Stop Loss Formula.

Unexpected gold economic news can come out of the blue & dramatically affect the price: this is why it's so important to have a stop-loss set for your open trade. It is best to cut gold trade losses early when a gold trade transaction is moving against you, it's better to cut your gold losses immediately rather than waiting for the loss to become a large one. Again, if you set your stoploss orders when you are entering a trade, then that's when you are most objective as a trader - Stop Loss Order.

Setting Stop Loss Formula

A key xauusd question is exactly where to place this stop loss order. In other words, how far should you as a trader set this gold stop loss below your purchase price? Many traders will tell you to set a pre-determined - maximum acceptable loss per xauusd trade, an amount based on your gold equity balance rather than use gold technical indicators for calculating where to place the stop-loss - Setting Stop-Loss Order Formula.

Professional money managers advice that you shouldn't lose more than 2 % of your gold account equity on one single gold trade. If you have $10,000 in gold capital, then that would mean the maximum loss you should set for any one gold trade is $200 dollars - StopLoss Order.

If you open a gold trade then that would mean you'd limit your risk to no more than $200 for that specific gold trade. In which case you'd set your stop-loss at 200 or the equal number of pips based on your gold trade position size of the trade that you have opened - StopLoss Example - Stop Loss Order Calculator Excel. The topic of gold risk management is a wide topic and it's discussed under learn gold equity management lessons.

• Gold Equity Management Introduction - The Parameters to Consider When Placing Stop Loss Orders
• XAUUSD Equity Management Methods - Stop Loss Example - Stop Loss Order Calculator Excel

The Parameters to Consider When Placing Stop Loss Orders

Most important question is how close or far this stop loss order should be set from the price where you entered the trade. Where you set the stop-loss will depend on several factors:

Because there are no guidelines cast in stone as to where you should place these stoploss orders on a chart, we follow general stop loss order setting guidelines used to help place these gold stop losses correctly.

Some of the general stop-loss setting rules used are:

1. Risk Percent - How much is one willing to lose on a single transaction. The general stop loss order setting rule is that a trader should never lose more than 2 percent of the total account capital on any one single trade.

2. Market Volatility - market volatility refers to the daily price range movement of the xauusd that you are trading. If a 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 will be taken out of the trade by normal market volatility.

3. Risk:Reward Ratio - this is measure of potential risk : reward calculated before opening a gold trade. If the market conditions are favorable then it's possible to comfortably give your gold trade more room. However, if the market is too choppy it then becomes risky to open a gold trade without a tight stop loss - then don't make the trade at all. The gold risk to reward ratio isn't in your favor and even setting tight stoploss orders won't guarantee profitable results. It would be wiser to look for a better gold trade transaction to next time.

4. Trade Position Size - if the trade transaction size opened is too large then even the smallest decimal price movement will be fairly large in risk percent 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's better to adjust to a smaller gold trade transaction size so as to give your gold trade more room for fluctuation, by setting a reasonable gold stop loss level for this stop-loss while at the same time reducing the trading risk for the trade.

5. Account Equity - If your account is under-capitalized then you will not be able to set your stoploss orders accordingly, because you will have a large amount of money that is invested in a single gold trade which will force you to set very tight stop losses. If this is case, you should think seriously about whether you've enough capital to trade Gold in the first place.

6. Market Conditions - If the price is trending upwards, a tight stop might not be necessary. If on the other hand the price is choppy & has no clear gold trend direction then you should use tight stoploss order or not open any trade transactions at all.

7. Time Frame - the bigger the time frame you use, the bigger the stop loss level should be. If you were a scalper gold trader your stoploss orders would be tighter than if you were a gold day trader or a gold swing trader. This is because if you're using longer time frames and you determine the price will be move up-ward it doesn't make sense to set a very tight stop loss because if the price swings just a little, your open order will be hit.

Setting Stop Loss Formula

The method of setting stop losses that you select will greatly depend on what type of gold trader you're. The most oftenly used technique to determine where to set stop loss orders is - resistance & support levels. These gold support and resistance levels give good points for setting these stop loss orders as they are most reliable zones to set stoploss orders, because the support and resistance zones won't be hit many times.

Stop Loss Order Example

The tutorial of how to set these stop loss orders that you choose should also follow the stop loss setting guidelines above, even if not all these rules apply to your gold strategy try to implement the guide-lines that will apply to your gold strategy depending on what type of trader you're.

Stop Loss Order - Setting Stop Loss Order Formula - StopLoss Order Calculator XAUUSD - Stop Loss Example - Stop Loss Order Calculator Excel