Stop-Loss is a tool that traders use to keep their capital safe by locking any order. It is a process where you can lock orders when there is a risk of losing money. And, then it will act by itself when it sees a wrong movement in progress. So, as a trader, you should have a good idea about this tool and know the process to use it.

Today, I will talk about the Stop-Loss tool that helps traders save money. Yes, it is a program set with commands that tell that if the market moves in the wrong direction, it will not do trading. That means it is a risk management tool that novice and expert traders use to protect their capital from a wrong decision. Today, my main discussion will be on how it is considered the lifeline for Traders.

Stop-Loss Tool’s Feature

Stop Loss is a Forex tool that helps us manage our risks. It locks our trade command if that is going in the wrong direction.

Let me explain the matter; if we give an order that if the currency rate is going lower, then we will trade. This means we put the function in the Stop Loss feature.

• And it will trade if the price is going lower.
• On the other hand, if the price starts to increase, it will lock the trader.

So this way, It helps us to save money from the wrong trading decision. 

According to experts, they suggest using Stop Loss to deal with wrong decisions. It helps us lock our trade position, and there is no risk of losing money.

Suppose the currency rate is going lower, then we will stop our trade. Here, it helps us avoid losing our money in the market and protect our investment.

Who Does Use Stop Loss?

It is suggested that new Forex Traders must use the Stop Loss tool to protect their investment with proper command. Because it works like a lifeline for new traders. It is the best way to limit losses in the Forex market.

Here, both day and Scalping traders can use the Stop-loss tool. However, it is best suited for day traders as it helps them control their risk. There is no possibility of losing money for wrong predictions and trading.

But what do the expert traders do?

They use it more than new traders. They use this tool to minimize risk and protect their decision with loss-minimizing tricks. After All, it will just stop trading and get disabled if the market moves in the wrong direction. But the only problem is that it is complicated to use and needs some time to master.

Nonetheless, if you have the market knowledge and idea about trends, you will find it very useful.

Advantages of Stop Loss

There are several benefits of using Stop Loss, and those are mentioned below-

• Stop-loss can be enabled with smaller margins and easy-to-do conditional trading.
• It does not need to invest in trading.
• It acts like risk-free management insurance.
• It gives extra freedom to set command and exit forex.
• You do not need to check the activity of Stop Loss very often.
• You can make active stop-loss buy orders for buying at a low price.

All these benefits make Stop Loss a popular risk management tool that all traders can utilize for better results.

Using it is not necessary for all traders, but with this helpful tool, you can get extra protection. So, we can stop loss and profit from selling currency at a higher price.

Disadvantages of Stop Loss

Like all programs and tools, it also has a few shortfalls that we should be aware of. And those are:

• The Program may not work 100%
• There is also the possibility of lock release and getting unwanted sell
• Not perfect for large margin setup for bigger market changes.
• If you do not cancel the command, it may Auto Trade and cause financial damage.

So, we should not use this feature by closing our eyes but we have to use it for better results and be aware of the risks.

Tips for using Stop Loss Effectively

It is not an AI-based tool or something that will activate automatically and save your money. So, you have to find the best stop loss strategy that will help us to stop losing money. And, the best practices are-

• It would help if you had a good idea about the market and currency price.
• But traders should know the features of Stop Loss to activate it for upcoming trade.
• You should manually monitor the market changes; it is cross-checking if the Stop Loss is working properly or not.
• Never set a margin for large price changes; it is not an effective model for bigger price protection
• Use this for small price change orders

All I am trying to say is- you can use these tools and study more online to learn about its feature. Among various risks in FX trading, it works like a shield that can minimize your loss and save your capital.

How to place stop-loss orders examples

I will go for an easy example here to understand how it works.

For example, we have 100 shares of Bing Corporation for $100 each. Then when we want to save from losing money, we set here a Stop Loss order that-

• If the price is less than $90 per share, it will trade and sell shares. It means it is saving you from more loss.
• On the other hand, if we set an order that the per-share price is higher than $105, then Stop loss will trade and sell. Here Stop Loss also makes a profit for us.

Final Verdict

Stop Loss is a feature that traders use for risk management. Any FX trader can minimize loss and make a profit with it. But he or she has to know the technique of using it. Just guide it and protect your trading from making more losses.