Detailed explanation of foreign exchange stop loss methods to effectively control risks

existforeign exchange market, Setting stop loss is a key link in risk control. Many traders understand that stop loss occupies an important position in foreign exchange trading. However, in practice, many investors cause unnecessary losses because stop loss setting is not scientific enough. Usually, there are three main ways to set stop loss positions: 1. Stop loss after an important support or resistance level is broken. This is a more common operation mode in actual combat. Investors often choose to stop loss at this position and leave the market. However, by observing foreign exchange charts at home and abroad, it can be found that in the foreign exchange market, it is not uncommon for the market to reverse after the resistance or support level is broken. Important support or resistance levels include: dense trading areas where prices stay for a long time; price highs or lows over longer periods; positions provided by trend lines, golden sections, or moving average systems, etc. The main reasons for the lack of reliability of these positions are:

(1) Large amounts of funds may anticipate the stop-loss price of most investors in the market, or even deliberately match a large number of transactions at certain prices to create the illusion of strong support or resistance, and then break through these positions with the advantage of funds, and make profits in reverse after the stop-loss order appears.

(2) The support or resistance positions provided by trend lines, moving average systems, and golden sections are themselves subjective, lack a stable and reliable basis, and have low accuracy. Therefore, the risk of setting stop losses at these positions is high.

2. Stop Loss After Absolute Amount Loss Reaches At present, this is the stop loss method used by many good traders. The main point of operation is to set the maximum amount of capital loss for incoming positions, usually 5% to 20% of the occupied funds, or it can be the absolute amount of occupied funds, such as 100 yuan per lot. Once the loss limit is reached, stop loss immediately and leave the market regardless of the current price. The following two points need to be noted when using this stop loss method:

(1) Different trading instruments or operating cycles should be subject to different stop-loss limits.

(2) The set stop loss limit needs to be probabilistically verified in the market. The advantages of this stop loss method are obvious:

(1) Highlight the principles of money management. Foreign experience shows that the core of a good trader is not in analyzing the market, but in managing money well.

(2) It has a probability advantage, and the longer the operation time, the more obvious the advantage.

(3) The stop loss position is far away from ordinary investors, avoiding the market risk brought by the first stop loss method. When using this stop loss method, it is necessary to do a lot of statistical and analytical work, determine the operation strategy, and find the best stop loss amount that suits your style. For example, when usingFXTWhen trading, you can adjust the stop-loss ratio according to your own risk appetite.

3. Stop loss after the self-tolerance limit is reached. This type of stop loss method is often used by beginners. Experience has shown that the appropriate use of this method in short-term trading can help to improve yields. In fact, some good traders also use this method occasionally. The specific operation is: when the position loses money, as long as it is still within the tolerance range, you can continue to hold it; otherwise, you can immediately stop and leave the position, even if the position has just been established. Flexible stop loss tools provided by platforms such as FXT can help execute this strategy.