Forex market is always volatile. If you are a wise and prudent trader, you have to try to eliminate risks, which accompany Forex trading. You have to decide how much money you are ready to lose if unforeseen circumstances occur. In order to make successful currency transactions the Forex traders can use trading instruments peculiar to the commodity market. An order is one of such effective instruments. Being a Forex participant you have to know how to work with the orders properly.
The traders can use stop-loss and take-profit orders. In case that you want to set limitation on the size of money losses, it’s necessary to place a stop-loss. Your position will be closed automatically by the broker or dealer if the price of a certain currency comes to a point at which a stop-loss is placed. If you don’t have time or desire to constantly monitor the price charts or anticipate the decline in the currency’s value concluding a deal, it means that you must issue a stop-loss. Your task is to determine the sum of money affordable to lose when you issue this order. If unfavorable market reversal happens, your money losses will be equal to the sum pre-set by the order.
Profitable long position implies the increase in the currency’s value. Consequently, the level of your profit will grow as well. But nobody can tell for sure whether the price of the currency will grow again in the near-term outlook. In this situation it’s necessary to issue a stop-loss lower the current price. In such a way you can earn money even if unforeseen circumstances happen.
The nature of a take-profit is similar to that of a stop-loss. However a take-profit considers only the market participant’s profit. You have to close your long position if the market prediction tells you that the price will start to fall at a given point. If you partner with a trusty Forex broker, he will advise you to issue a take-profit above your position. This point has to be the most suitable for you in order to close your position. Once you’ve determined this point, your dealer or brokerage firm can close your position automatically at mentioned point.
Very often, Forex participants place both take-profits and stop-losses. The placement of these orders will help you to make your Forex online (learn more about it) operations more productive.