STOP LOSS IN TRADING FOREX

When you trade forex, it is important to understand how to place orders with a forex broker. Trading orders are chosen according to your trading style and intentions – the way you plan to enter and exit forex market.

A stop loss order closes an existing trade and prevents the unnecessary losses. When the stop loss order is reached (this happens when the price movement climes above or drops below a specified stop price), the trade is closed at the current market price.

A Stop order becomes a market order as soon as the stop price selected is reached. Thus, for example, instead of losing 100 pips, you lose only 20. Stop loss is rather a term, then an actual order type and the main agenda of a stop loss is to exit a losing trade without having an out of control situation!

A limit order in forex refers to a "limit" price at which you wish for a trade to be implemented. It is an order of maximum or minimum at which you plan to buy or sell. Limit order is very useful since it guarantees the trade to be executed at a selected price.