Stop Loss Order
Stop loss orders are one of the order types that traders can execute on the financial markets. The name “stop loss” is self-explanatory: stop the losses before they get out of hand.
What is a stop loss? A stop loss order is an order or instruction given to the broker/dealer to automatically close a trade that has gone contrary to the trader’s position at a particular price level with the aim of preventing further losses if the adverse trade conditions persist.
Brokers With Stop Loss Orders
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Founded in Australia in 2010, Pepperstone is a highly regarded broker specialising in forex and CFDs. Serving more than 400,000 clients globally, it provides access to over 1,300 financial instruments through popular platforms like MT4, MT5, cTrader, and TradingView. Its fee structure is both low and transparent. With regulation by reputable bodies such as the FCA, ASIC, and CySEC, Pepperstone guarantees a safe trading environment for traders at every level.
Instruments Regulator Platforms CFDs, Forex, Currency Indices, Stocks, Indices, Commodities, ETFs, Crypto (only Pro clients), Spread Betting FCA, ASIC, CySEC, DFSA, CMA, BaFin, SCB MT4, MT5, cTrader, TradingView, AutoChartist, DupliTrade, Quantower Min. Deposit Min. Trade Leverage $0 0.01 Lots 1:30 (Retail), 1:500 (Pro) -
Founded in 1989, CMC Markets is a reputable broker publicly listed on the London Stock Exchange. It holds authorisation from top-tier regulators such as the FCA, ASIC, and CIRO. The brokerage, which has received multiple awards, boasts a global membership exceeding one million traders.
Instruments Regulator Platforms CFDs, Forex, Stocks, Indices, Commodities, ETFs, Treasuries, Custom Indices, Spread Betting FCA, ASIC, MAS, CIRO, BaFin, FMA, DFSA Web, MT4, TradingView Min. Deposit Min. Trade Leverage $0 0.01 Lots 1:30 (Retail), 1:500 (Pro) -
FXCC, a well-established brokerage since 2010, offers cost-effective online trading. Registered in Nevis and regulated by CySEC, it is distinguished by its ECN conditions and absence of a minimum deposit requirement. The account opening process is efficient, taking under five minutes.
Instruments Regulator Platforms CFDs, Forex, Indices, Commodities, Crypto CySEC MT4, MT5 Min. Deposit Min. Trade Leverage $0 0.01 Lots 1:500 -
IC Markets is an internationally acclaimed forex and CFD broker, admired for its competitive pricing, diverse trading instruments, and superior technology. Established in 2007 and based in Australia, the firm is under the regulation of ASIC, CySEC, and FSA. It has successfully drawn over 180,000 clients from more than 200 nations.
Instruments Regulator Platforms CFDs, Forex, Stocks, Indices, Commodities, Bonds, Futures, Crypto ASIC, CySEC, FSA, CMA MT4, MT5, cTrader, TradingView, TradingCentral, DupliTrade, Quantower Min. Deposit Min. Trade Leverage $200 0.01 Lots 1:30 (ASIC & CySEC), 1:500 (FSA), 1:1000 (Global) -
Founded in 2006, FxPro has built a reputation as a reliable non-dealing desk (NDD) broker, providing trading access across more than 2,100 markets to over 2 million clients globally. It has received over 100 industry awards, reflecting its favourable conditions for active traders.
Instruments Regulator Platforms CFDs, Forex, Stocks, Indices, Commodities, Futures, Spread Betting FCA, CySEC, FSCA, SCB, FSA FxPro Edge, MT4, MT5, cTrader, AutoChartist, TradingCentral, DupliTrade, Quantower Min. Deposit Min. Trade Leverage $100 0.01 Lots 1:30 (Retail), 1:500 (Pro) -
Founded in 1974, IG is a part of IG Group Holdings Plc, a publicly listed brokerage (LSE: IGG). The company provides spread betting, CFD, and forex trading, offering access to over 17,000 markets. Its platforms and investing apps are notably user-friendly. Over the past 50 years, IG has consistently been an industry leader, excelling in all essential areas for traders.
Instruments Regulator Platforms CFDs, Forex, Stocks, Indices, Commodities, ETFs, Futures, Options, Crypto, Spread Betting FCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA, FINMA, CONSOB, AFM Web, ProRealTime, L2 Dealer, MT4, TradingView, AutoChartist, TradingCentral, ProRealTime Min. Deposit Min. Trade Leverage $0 0.01 Lots 1:30 (Retail), 1:222 (Pro) -
IC Trading belongs to the reputable IC Markets group. Designed for dedicated traders, it offers highly competitive spreads, dependable order execution, and sophisticated trading tools. However, it operates from Mauritius, an offshore financial centre, allowing high leverage but within a less regulated environment.
Instruments Regulator Platforms CFDs, Forex, Stocks, Indices, Commodities, Bonds, Cryptos, Futures FSC MT4, MT5, cTrader, AutoChartist, TradingCentral Min. Deposit Min. Trade Leverage $200 0.01 Lots 1:500 -
Established in 1999, FOREX.com is now integrated into StoneX, a prominent financial services entity catering to more than one million clients globally. The broker is regulated in numerous jurisdictions, including the US, UK, EU, and Australia. It offers a vast array of markets beyond forex, delivering competitive pricing on state-of-the-art trading platforms.
Instruments Regulator Platforms Forex, CFDs, Stocks, Indices, Commodities, Futures, Options, Crypto NFA, CFTC, CIRO, FCA, CYSEC, ASIC, SFC, FSA, MAS, CIMA MT4, MT5, TradingView, eSignal, AutoChartist, TradingCentral Min. Deposit Min. Trade Leverage $100 0.01 Lots 1:30 -
Fusion Markets, an online broker since 2017, operates under the regulation of ASIC, VFSC, and FSA. Renowned for offering cost-effective forex and CFD trading, it provides various account options and copy trading solutions to suit diverse trading needs. New clients can begin trading with a simple three-step registration process.
Instruments Regulator Platforms CFDs, Forex, Stocks, Indices, Commodities, Crypto ASIC, VFSC, FSA MT4, MT5, cTrader, TradingView, DupliTrade Min. Deposit Min. Trade Leverage $0 0.01 Lots 1:500 -
Trade Nation is a leading FX and CFD broker regulated in the UK and Australia, among other places. The company provides competitively priced fixed and variable spreads on over 1,000 assets. Traders benefit from advanced platforms and comprehensive training materials. Additionally, the Signal Centre offers valuable trade ideas.
Instruments Regulator Platforms Forex, CFDs, Indices, Shares, Commodities, Futures, Bonds, Spread Betting, Cryptos (Bahamas Entity Only) FCA, ASIC, FSCA, SCB, FSA MT4 Min. Deposit Min. Trade Leverage $0 0.1 Lots 1:500 (entity dependent)
Common Mistakes Traders Make in Setting Stops
When choosing a price level to set a stop loss, are there any special considerations or are stop loss levels just set arbitrarily at the trader’s discretion? It is very unfortunate that many retail traders do not know the principles that guide the setting of a stop loss level, and the so-called forex trainers or seminar resource persons who run all the “intensive” seminars we see being advertised on the street corners and on the internet are not making things easier.
There is hardly a retail trader we come across who has been able to answer this question satisfactorily. Many believe that setting a stop loss is an arbitrary event. Worse still, there are a few who actually advocate not setting a stop loss so as to give the trade room to breathe. The first point of view supposes that all currency pairs and trades act alike and so there is nothing to consider when setting a stop loss level. The second standpoint presupposes that trades are predictable and in so far as the trader is on top of the action, there is no need for a stop loss.
Both standpoints are fundamentally flawed and will present major problems for the trader. The first standpoint is flawed because all currencies do not behave alike. Some have a greater intraday range and have more volatility than other currencies. So assigning the same stop loss or not considering the inherent characteristics of the currencies themselves when deciding to set stops will lead to either stops being so tight that the choke the trade, or to loose that they do not exert the necessary controls on any losses that may occur. The second standpoint assumes that the trader will always be on his computer to monitor open positions (which is impossible), or that the markets can always stay predictable without any sudden adverse market events occurring (which is also not the case). The end result is that adopting both trade standpoints when it comes to setting stop loss levels will eventually lead to catastrophic results.
Principles for Setting a Stop Loss
Setting a stop loss is a careful business which the trader should do with much consideration. There are factors to be considered when setting a stop loss. Some of these are:
1) Intraday price range of the currency asset.
2) Volatility index of the asset.
3) Presence or absence of any points of resistance or support within the immediate price area.
4) Time frame being traded.
5) News releases for the day/time period in view.
6) Trader’s margin.
The intraday price range of an asset is very important when considering where to set a stop loss. For a currency with a 100 pip intraday price range, a stop loss of about 50 pips is ok, depending on when the trade was executed and how close the trade is to key levels of support and resistance. However, you cannot set a 50 pip stop loss for an exotic currency pair with a 1000 pip price range, or for a commodity asset like gold that could sometimes move as much as 5,000 pips in a day. So currencies with lower ranges will require smaller stops, and larger stops must be used for currencies with larger price ranges. Similarly, a trader who intends to close an open position the same day it was opened would not need large stops when compared with another trader who used a daily chart for his analysis and is looking to keep the position open for weeks at a time.
Another consideration is the trader’s margin. It is foolhardy trying to trade assets with large moves on a small margin. The margin will restrict the trader and force him to use tight stops to choke the trade.
It is good practice to always consider where the key levels of support and resistance are located before opening a position. If a price level is in between a key support and resistance, the trader may be forced to use a larger stop to accommodate any drawdowns without closing the trade. Sometimes it is better to use pending orders that will allow the trade to gravitate towards a key level, and then tighter stops can be used knowing that prices will probably be held back by the key levels before triggering a stop loss.
Another factor to be considered is the volatility index of the currency pair to be traded. For instance, the GBP/JPY currency pair is known to be an extremely volatile currency pair, with a spread of at least 8 pips (or $80 on a standard lot position). It has a tendency of bouncing around before finally deciding where it is going. If a trader is trading this pair on an account margin in the lower range of thousands, then the trader must be very careful when setting stops. Too tight a stop will cause the trade to be closed prematurely. There is nothing more frustrating than seeing a trade closed out prematurely, only for the position to eventually end up in the predicted direction of the trade.
Finally, it is always noteworthy considering news trades when setting stop loss levels. This is especially important for traders who are trading medium to long term. A news trade can cause a position that has probably been in profits for a few days to give every dime of profit up in a few short minutes.
Setting a stop loss is serious business, and if traders pay attention to the details that have been discussed above, they will be able to make more informed decisions when giving the stop loss instructions to their broker.