MetaTrader 4 - Using a Stop

 

Trading without using a Stop

is like jumping out of a plane

without using a parachute!

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I will strongly urge you to always use a Stop when trading, as there can be very strong and sudden moves at times, which may lead to huge losses if you are not protected.

 

 

You can minimize your risk and / or safeguard your profits

by using a Stop when in a trade!

 

 

A Stop is an order that you can enter where a trade will be closed the moment that the market touch that level.

 

 

To activate a Stop:

 

It is possible to activate a stop even before you enter a trade!

 

Press the F9 key to open the Order Window:

 

 

 

Decide where you'd like to put the stop and enter the value into the Stop Loss block.

 

Please note: At the start of a trade the Stop Loss value will always be behind the entry:

  • If you plan to activate a Buy transaction (= you believe that the market will move upwards for the duration of the trade), the Stop Loss will be below the entry of the trade.

  • If you plan to activate a Sell transaction (= you believe that the market will move downwards for the duration of the trade), the Stop Loss will be above the entry of the trade.

 

The Buy or Sell transactions will be visible as a green dotted line on the graph.

 

A Stop Loss will be visible as a red dotted line.

 

You will also see the Stop Value in the Terminal Window / Trade Tab on the bottom of the screen under the S / L heading.

 

 

You can activate a Stop any time after you entered (activated) a trade!

 

 

Right-Click with the mouse in the Terminal Window on the bottom of the screen in the Trade Tab on the active trade and select:

 

Modify or Delete Order

 

 

Shortcut:

 

You can double-click in the S/L block of the active trade to get to the Order Window!

 

 

The Order Window will appear:

 

 

Click on the Red Button to enter the Stop Value into the Stop Loss block.

 

You may now change the value of the Stop Loss by using the up and down arrows, or by typing in the new value for the Stop Loss.

 

 

When finished, click the Blue Modify Bar at the bottom of this screen.

 

 

NEW:

 

In a recent update for MT4 Metaquotes added another very easy and quick way to activate a stop:

 

Move the mouse cursor on top of the green dotted line where your trade was activated:

 

 

Another double headed arrow will appear next to the mouse cursor.

 

If you activated a Buy trade, click and pull down to activate a stop.

 

 

If you activated a Sell trade, click and pull upwards to activate a stop.

 

 

 

While you are moving the stop around, MT will show you the number of pips that the stop is away from the entry:

 

 

When you are comfortable with the distance between the stop and the entry you can let the mouse button go. MT will immediately activate a stop for you in that position.

The red dotted line will be visible.

 

The Stop Loss is now in place and you will also see the Stop Value in the Terminal Window / Trade Tab on the bottom of the screen under the S / L heading.

 

If you read here a value of 0.0000 it means that there is no stop active!

 

* If you pulled the stop in the wrong direction, then MT will have activated a Take Profit (Target or TP) and not a Stop!

 

 

You may move the stop to a new position whenever you want by following the procedure explained above.

  • Double-click in the S/L block of the active trade to get to the Order Window and change the value in the Stop Loss block to the new value.

  • Click the Blue Modify Bar to confirm and finalize the new value for the Stop.

OR: Just click on the red dotted Stop line on the graph and drag it to the new position!

 

 

Where is the best place to put my Stop?

 

This is a question that I hear quite often.

 

If it is too close to the market, you may be stopped out too quickly, and if it is too far away, you may lose a huge amount of pips when the market change direction.

 

The best place will be determined by your strategy and money management.

 

Many people will use a fixed number of pips for the size or distance of the Stop. The number will be determined by the timeframe that they use - the larger the timeframe, the larger the size of the Stop.

 

Others will calculate the distance of the Stop according to their money management system.

 

For example: You are willing to risk 1% of the money in the account on the Stop -

  • If you traded with 1% of the money in the account, then you can place the Stop 100 pips away from the entry.

  • If you traded with 2% of the money in the account, then you can place the Stop 50 pips away from the entry.

  • If you traded with 5% of the money in the account, then you can place the Stop 20 pips away from the entry.

  • If you traded with 10% of the money in the account, then you can place the Stop 10 pips away from the entry. This is too close under most cirumstances. You will have to increase the amount you are willing to risk.

It is very important that there must be a healthy balance between the amount of pips (money) you risk and the profit potential of a trade. If the losses are larger than the profits, your account will be empty in a short while!

 

Some traders prefer to use the Fractals indicator as an indication of where to put their Stop.

 

 

This indicator will plot an arrow whenever a new high or low position has been identified.

 

In a Sell trade (market is moving downwards) you will move the Stop to the new Fractal on top of the candles.

 

In a Buy trade (market is moving upwards) you will move the Stop to the new Fractal at the bottom of the candles.

 

 

During training I will explain the best places for the placing of a Stop and how to follow the market with the stop at a safe distance!

 

 

Read more about the Forex Masters Advanced Training Course.

 

 

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Disclaimer

 

Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

 

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