With the availability of different strategies, Forex trading is offering several benefits. The potential of these strategies makes huge profits with a minimum possibility of losses (due to wrong judgment). Although traders know the importance of focusing on the live market to understand its possible outcomes, several traders incur losses due to hasten. In this perspective, Forex sell stop order and buy stop order will be helpful in keeping the amount of loss as low as possible (if it incurs).
What is a stop order in Forex?
Stop order is defined as the order to buy or sell an asset when the price crosses the particular value. It is then ensuring the greatest probability of a predefined entry to increase the value of profitable amount.
It can also be defined as an order that is previously set to limit the value of price that is liable to incur a maximum loss due to the flow of movement of Forex market. This tells that stop order can be performed as an entry point (market order) to increase profit level and exit value to protect from losses.
In this phenomenon, it can be said that traders will get Forex buy stop order for a long position, and Forex sell stop order for a short position. These stop orders will not guarantee desired entry or exit points.
Investors who use technical analysis concepts to understand the market trend should place these stop orders as per the ‘indicators’ or ‘support and resistance levels.'
What is a buy stop order in Forex?
Buy stop order is the value that is set above your current offering price. It will become its next market price when its current price goes above buy stop price. This means traders will gain a considerable amount when the momentum increases in the upward direction on any particular stock. One can set the next buy stop order at this position in the desire of repetition of same phenomena.
What is a sell stop order in Forex?
Sell stop order is the value that is set below your current price of initiating the trade. It will become your next market price when its current price goes below sell stop price. This means traders will earn a considerable amount when its momentum gains in the downward direction on any particular stock. One can set its next sell stop order here and hope for repetition of same phenomena.
In fact, traders should remember some of the vital points to protect themselves from an immediate effect of Forex sell stop order or buy stop order. This includes:
Price at which sell transaction takes place might not be the next market price. This means one has to focus on the market trend.
Price of buy transaction might not be the next market price because of the flow of the market.
This will help in making some changes in Forex sell stop order value or buy order value to protect investors from future losses.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.