What are Stop Losses, and Should I Use Them?

Discussion in 'Forex Trading' started by LearningMarkets, Aug 19, 2008.

  1. LearningMarkets

    LearningMarkets ET Sponsor

    Stop losses are trade orders you set with your dealer that instruct your dealer to automatically take you out of a trade if the currency pair moves too far against you. Think of them as a saftey net for your trades. For instance, if you are long a currency pair, you can set a stop loss below the current price of the currency pair to protect yourself if the price suddenly reverses trend and starts moving lower. Conversely, if you are short a currency pair, you can set a stop loss above the current price of the currency pair to protect yourself if the price suddenly reverses trend and starts moving higher.

    Once you have set your stop-loss order, your dealer will automatically take you out of your trade if the price of the currency pair hits the price level you have designated in your stop-loss order. That means you don't have to be in front of your computer 24 hours a day to have some protection on your trades.

    Check out the retro black and white (sorry, something got messed up with the color settings on my camera) video at the link below to learn more.

    http://www.pfxglobal.com/forex-video-archives/welcome-to-stop-loss-week-at-pfx.html