When you first start exploring the benefits of trading and investing to build your wealth, you’ll discover that there are a lot of different terms and strategies that you need to get accustomed with. For a lot of people, investing starts with learning a new language that includes everything from Forex, to cryptocurrency. One of the most important terms that you’ll learn on your journey is stop loss. Today, we’re going to introduce you to what a stop loss order is, and how it can help you to maintain a profit when you’re trading in currencies. The more you know about this concept, the easier it could be to protect yourself from unnecessary risk and loss.
What is Stop Loss Trading?
A stop loss order is one of the many tools that you can use when you’re working with brokers such as Easymarkets to make your investments. When you choose the right broker to help out with your buying and selling plans, that broker will allow you to place an order that tells them to sell a security or asset as soon as it reaches a certain price. When you place that order, you make sure that if the price of your currencies begins to drop too far, you don’t have to worry as much about massive losses, because your broker will get you out of a dangerous situation immediately.
As a result, having a stop loss can be an excellent way to protect yourself from risk. It also means that if you’re not able to sit in front of a computer screen and watch your investments all day, you’re not going to log on to some horrible news. Of course, you will need to spend some time choosing the right stop point for your needs.
The Importance of Stops
The right stops and orders embedded into your trading routine can make a huge difference to your ability to make a profit. Not only does this kind of tool mean that you’re not going to have as much risk to worry about when it comes to suddenly dropping prices in the marketplace – but it also means that you’re less likely to be governed by emotions when making decisions.
If you’re concerned that you’ll force yourself to continue holding onto a position out of greed or fear when the market value begins to plummet, a stop loss will stop you from sticking to that strategy to a point when you experience an astronomical loss. At the same time, this kind of strategy ensures that if you have another job alongside trading – which is common for beginners – you’re not going to spend all day worrying about what’s going to happen to your investment.
The good news is that a stop loss is surprisingly easy to use. With the right broker, all you’ll need to do is let the company you’re trading with know when you want to sell an asset. Your brokerage brand can handle the rest of the work on your behalf.