Stop loss, cut loss! maybe most of you are already familiar with the term because the term is an inseparable part of risk management that we have discussed before.
We must do stop loss to prevent things we do not want, namely losses due to incorrect analysis of the market conditions that we are observing. The mistakes that we have made should not get very high tolerance because the higher the tolerance we give, the greater the loss value we will get so that the stop loss really must be executed.
Stop loss or cut loss can be done manually or automatically. If we want to do it manually, then at least we must often see the price movements of the currency pairs that we are trading (making tired and not calm in everyday life) but if we do it automatically then we do not need to do it so we can do other activities such as holidays or rest.
By making a stop loss means we extend the life of our trading account so that our account continues to be able to get the opportunity to get the next profit.
To do a cut loss or stop loss then you must determine in advance the amount of risk that you can receive (what percentage) then you pull down or up from the buying or selling price.
Suppose you want to buy a AUD / USD currency pair of 1000 (micro account) at a price of 0.77980 and you want to put a stop loss of -82 pips , your stop loss will be at the price of 0.77160 (0.77980 – 82).
Not only do we determine the stop loss that we can do mechanically (by system) but we can do it automatically when determining when to take profit and get out of the market. For example, you will exit the market or realize profits if the price moves along 42 pips, then all you have to do is increase the purchase price, the number of take profit values that you have determined. So that your take profit value will be executed at the price of 0.78400 (0.77980 + 42)
And to determine stop loss there are several ways that can be used, among others based on:
In plain view to determine stop loss or cut loss is very easy but based on the fact this is very difficult to do. Why? because we are required to be able to determine the stop loss point which is really our stop loss point and not a false point.
For more details, we will discuss this for each method above.