Is Stop loss a part of the Forex trading business?
2022-11-02 11:08Is Stop loss a part of the Forex trading business?
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Stops are a critical part of money management, provided they are placed at logical price points. For example, just below support for a buy position, or above resistance for sell positions. The stop loss can also be used to calculate lot size when combined with a given risk factor. For example, if a 2% risk factor is applied and this amounts to, say, $100 of account balance, and the stop loss value is, say, $20, then $100 divided by $20 = 0.05 lots. Hence, if the stop is hit your losses are limited to 2% ($100) of account balance.
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