Stop Loss Orders

Definition - What does Stop Loss Orders mean?

A stop loss order is a forex market order that is designed to automatically close out a trade once it has fallen below a certain limit. Essentially, stop loss orders put a limit on the downside of a trade. This helps traders avoid hanging on to a position for emotional reasons when the market moves against it.

ForexDictionary explains Stop Loss Orders

Stop loss orders can also be used to preserve profits, as is the case with a trailing stop that is adjusted up as the position profits. When using the stop loss orders to protect against losses, however, a forex trader must take into account how leveraged the position is. Leverage magnifies both gains and losses in forex, so it is generally a good idea to keep stops close to the entry position in order to preserve trading capital from large losses.

Posted by:

Connect with us

ForexDictionary on Linkedin
ForexDictionary on Linkedin
ForexDictionary on Twitter

Sign up for ForexDictionary's Free Newsletter!