The setting of stop loss and take profit is related to the control of risks and profits. After traders have conducted a detailed analysis of the market and determined the trading plan, all that is left is the execution of the trading plan. Stop loss and take profit are the most important aspects of transaction execution.

In the foreign exchange and CFD markets, traders are best at using graphics and technical analysis to conduct transactions. Therefore, when setting stop loss and take profit, they usually pay more attention to technical key points.

The first way to set a stop loss: set it outside the recent high and low prices

The yellow circle in the picture is the buying price of the trader's entry, then the trader The correct setting method should be to set the stop loss at the red solid line below the blue box in the picture. The principle of this setting is: the blue box is a low point where the price has formed. When the price falls to that low point again, it will receive support and it will be difficult to break through the low point downwards. In this way, it is relatively safe to enter the market and buy a rising position. You will not stop the loss and leave the market due to some price noise, and miss the later rising market.

The second way to set a stop loss: set it outside the nearest integer price

The trader shorted EURUSD at 1.1270 in the yellow circle in the figure, and there is an integer above 1.1300 In order to control the market risk but not let the price noise hit the stop loss level, the trader set the stop loss at 1.1320 above the 1.1300 integer price. We can see that even if the price suddenly and rapidly rose in the later period, it did not break through the integer of 1.1300, and it was even more difficult to reach the stop loss, ensuring the safety of the position.

The last issue that trading experts are concerned about is the execution of stop-profit and stop-loss. In financial markets, especially the foreign exchange market, generally speaking, liquidity is very abundant, and pending orders at any price can be accurately executed. However, when major news events are announced, black swan events break out, and special time periods (Monday opening) ), insufficient liquidity may also occur. The impact of insufficient liquidity on individual traders is that the pre-set stop loss price cannot be completed in time, and slippage will occur.

For example, investor A is short EURUSD at 1.1200 and sets the stop loss at 1.1220. When the market deviates from the expected trend by more than 20 basis points, the position will be closed and left. But the actual stop-loss exit price is at 1.1230, which deviates from the preset stop-loss price by a full 10 basis points. Relative to the stop loss of 20 basis points, the loss increased by 50% to 30 basis points. This is the harm done to investors by transactions with stop loss price slippage.

Of course, this phenomenon does not happen often, but it will be encountered when the market fluctuates significantly, emergencies occur, and major news data is released. In order to avoid unnecessary losses, trading experts can usually choose special stop-loss methods provided by brokers: For example, the "guaranteed stop-loss" function provided by IG Group to traders, investors only need to pay a small additional fee. It can ensure that the stop loss is executed at the preset price.