How to use stop loss and profit target

It is very important to understand how to use stop loss and exit target for a beginner trader who just join in Forex trading market to avoid great loss, because a beginner trader doesn’t know how to trade correctly yet. So, in this article we will discuss about how to use exit target and stop loss correctly in Forex trading activities.

A beginner trader ask to me : Should I stay in front of my computer and connect to internet if I want to close my trading position ? and I told him : You should not stay in front of your computer and watch the quotes every time you want to close your trading position.

We don’t have to wait in front of our computer just because we want to close our trading position. You can left your trading position and you can close your trading position automatically, all we have to do are plot our target profit and plot our stop loss in our trading platform.

We only 15 minutes for analysis the market, 10 minutes for open trading position and set our target profit / stop loss order. We only use less than 30 minutes , and after that we can do our daily job. You will get your profit after your profit target is hit and you do not have to worry loosing your money to much because you already set your stop loss order. Your target profit and stop loss order can be done automatically.

Profit target order
Profit target is a profit level that you want to get for your trading position. You can set your profit target level when you are opening your trading position or when every time you want as long as your trading position is still open or active.
Stop loss order
Stop loss order make sure your trading position closed automatically. You can limit your trading risk to avoid from losing big money when market moves against you.

Profit target and stop loss order example
If you have open long position at 1.2000, your profit target should be higher for instance 1.2050, and stop loss order should be lower for instance 1.1975. if you have open short position at 1.2000, your profit target should be lower for instance 1.1950, and your stop loss order should be higher for instance 1.2025.

The one thing you should remember is market price is consists 2 parts, sell price (bid price) and buy price (ask price)
Trading short is opened with bid price and closed with ask price. Trading long is opened with ask price and closed with bid price.
The different between bid and ask is called spread. Every pair has different spread, for instance spread for EURUSD is 2 and spread for GBPUSD is 4. Spread value is depend on each broker,