This article will provide an explanation of what is a stop loss and a take profit when trading forex.
Stop loss and take profit forms two important elements of trade management and is just as important as the analysis one would do before.
It is profitable to make long-term trades on the Forex market. You can close trades or you can use Stop Loss (SL) and Take Profit (TP).
Take Profit defined as target price is an order that you tell or send to your broker informing them to close your position when price which reaches a specified price level in profit.
The Take Profit setting closes the trade at the profit level you’ve set in advance. For example, when making a trade, you’ve set Take Profit 150 pips. If you reach this amount, the trade will close automatically.
That means that once the profit reaches 150 pips, the trade will automatically close. You will get the trade amount of $150 profit on your account (depend on pair of your trading).
Your Capital is at Risk
We need them to reduce risks, to fix the profit level and not to sit in front of the monitor 24/7.
The Stop Loss setting closes the trade at the loss level you have set. For example, when making a trade, you have set Stop Loss 100 pips. If you lose this amount, the trade will close automatically.
That means that if your forecast is not correct and the loss amount is 100 pips, the trade will automatically close. You will get the trade amount of $100 or over loss on your account.