Four Types of Stops You May Consider at Trading

George T. Taft
A Logical Method of Stop Placement

Traders should focus on managing their money. If they can follow the right money management techniques, it might be possible to make money. Many traders face issues as they have no proper idea about money management. However, traders can develop their money management skills but practice through the demo account. Different types of traders use different types of techniques to manage the money. However, they also need to use different types of tools. Sometimes, traders face problems because of their unconsciousness.

In this post, we’ll discuss the four types of stops. By reading the article, you might know why you need to use these. So, read the article carefully.

Equity stop

The equity stop is known as the simplest among the stops. Mainly traders consider using the2% equity stops. On a mini lot, traders take the $200. But, aggressive traders may consider using 55 equity stops. For this reason, sometimes, they face trouble. Because 5% equity stops are the upper limit. So, traders may face issues. However, there are disadvantages of the equity stops. Because it places arbitrary exit points on the trader’s position. To satisfy the traders’ internal risk factors, the trades were liquidated. But, it’s not the result of the logical response to the price action.

Chart stop

Newbies should do the technical analysis properly to use the chart stop. Most of the time, the traders who do the technical analysis use the equity stops. However, to use the chart stop correctly, traders should learn to interpret the price chart properly. In this method, you will be analyzing the real time market data to find the potential exit point for your trades. People who trade options in UK, often uses this stop to limit their losses in the most volatile market condition.

Volatility stop

Volatility stop is also known as the sophisticated stop. The Forex market is highly volatile. A volatility stop is needed to use during the high volatility if the values of the currency pair go wide ranges. In this situation, traders need to cope up and try to hold the position for a long time to avoid the risk. However, during the low volatility, it also needs to use. Because traders need to compress the risk parameters. By using the Bollinger bands, it’s really easy to quantify the volatility of the market. However, traders should know about the use of Bollinger bands. Because, if they can’t employ this properly, they may face problems. So, they should use the demo account which might help them to flourish their skills. However, before using any tools or indicators, try to become sure about this.

Margin stop

Some people think the use of margin stop is an orthodox strategy, but it really works better. However, if the traders can use the margin stop properly, they may get a better result. In this strategy, traders need to divide their capital into 10 parts which are equal. For example, if the trader’s total capital is $10,000. They need to open the account with $1000 with the Forex dealer. And other money will be in the bank account. However, traders should know about their risk tolerance ability because it would help them to choose how many units they can trade. However, some Forex dealers give the chance to get high leverage. But, traders need to become aware of this because they may blow their accounts.

So, traders should gain practical knowledge which might help them to get the success. However, traders should use the demo account and start practice through this. However, many traders directly jump into the market. For this reason, they can’t make money. However, they should increase their confidence. Sometimes, because of a lack of confidence, traders can’t manage their money. However, if they can practice properly, they might be able to increase their confidence. So, they might go on the long path. However, they always need to keep hope. So, be strong and work hard, you may get the success. 

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