Anyone who has been trading gold for any significant amount of time knows reducing losses is sometimes more important than increasing profits. This is the reason why many gold traders will incorporate stop losses into their trading plans. It gives anyone involved in the online trading of gold the opportunity to get out of any given trade before it gets out of hand. In other words, it allows you to cut losses and move on to other opportunities while you still can. Here are some different strategies to consider when it comes to stop losses.
Percentage Stop Loss
A percentage stop loss seems like the easiest way to manage risk, since you’re setting a percentage of your account you’re willing to lose. However, anyone experienced with gold trading online knows it isn’t that easy. You also need to take into consideration the market environment, support and resistance and other factors in order to prevent losing more and winning less.
Time Stop Loss
A time stop loss is one of the most popular methods since you can set any specific time you want to stop a trade. This could be a matter of weeks, days or even hours. If you don’t like to trade overnight or on weekends, you could set a time stop loss to close at 5pm every day and close on Friday through the weekend. It takes some analysis to determine when the most effective use of a time stop loss is, but once it’s determined, you can seriously improve your chances of getting ahead.
Chart Stop Loss
If you’re trading gold online, you should be looking at the gold charts frequently, so it makes sense to set stop losses based on charts to save time. Utilize your knowledge of support and resistance levels to set your chart stop losses. Many times it makes sense to set stop losses just below the trend lines, but every gold trader has different strategies.
Volatility Stop Loss
Price volatility also requires a gold trader to read the charts often. You don’t want to set your stop loss too low, because you could be missing out on a good move due to price volatility. With the market constantly fluctuating, it’s best to give yourself a range based on recent price fluctuations. This ensures you have a little breathing room to play with so you won’t miss out on a potentially great opportunity.
When you incorporate these different types of stop losses into your plan for gold trading online, you’ll be able to minimize a lot of risk.
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