Control risk by capping losses

Stop-Loss orders allow traders to set an exit point for a losing trade. If you are short a currency pair, the Stop-Loss order should be placed above the current market price. If you are long the currency pair, the Stop-Loss order should be placed below the current market price. Stop-Loss orders help traders control risk by capping losses. Stop-Loss orders are counter-intuitive because you do not want them to be hit; however, you will be happy that you placed them.

Thursday, November 27, 2008