Trading CFD Choose a Stop Loss CFD Order Level

How to choose you stop loss level the target stop loss should be based on various strategies depending on your type of cfd method.

The three techniques of choosing stoploss levels are:

Strategies & Techniques of Setting Stop Loss CFDs Orders In CFDs

Traders using a cfd system must have mathematical calculations that reveal where the order must be placed.

A trader can also place a stop loss cfd order according to the indicators used to set these orders. Certain indicators use mathematical equations to calculate where the stop loss cfd order should be set so as to provide an optimal exit point. These technical indicators can be used as the basis for setting these orders.

Traders also place these orders according to a predetermined risk to reward ratio. This method of setting is dependent upon certain mathematical equations. For examples a ratio of 50 pips stop loss can be used by a trader if the trade has potential to make 100 pips in profit: this is a risk : reward ratio of 2:1

Other traders just use a predetermined percent of their total cfd account balance.

To set a stop-loss it is better to use one of the following techniques:

1. Percentage of CFDs account balance

This stop-loss setting method is based on the percent of account balance that the trader is willing to risk.

If a trader is willing to risk 2% of account balance then the trader determines how far he will set the stop loss cfd order level based on the trade size that he has bought or sold.

Example:

If a trader has a $10,000 trading account & is willing to risk 2 %

• If the trader buys 1 mini contract

  1 pip = $1

  Then setting at 2 %

  2% is $ 200

2. Setting Stop Loss CFD Orders using Support & Resistance Areas

Another way of setting cfd stop loss cfd orders is to use supports and resistance levels, on the cfds charts.

Given that stop loss cfd orders tend to congregate at key points, when one of these levels is touched by the cfds price, other cfd orders are set off. Stop loss orders tend to accumulate just above or below the resistance or support levels, respectively.

A resistance or a support area should act like a barrier for the cfds price movement, this is why they are used to set stop-losses, if this barrier is broken the cfds price movement can go toward the opposite direction of the original cfd trade, but if this barriers (support and resistance levels) are not broken the cfds price will continue moving in intended direction.

Stop Loss CFD Order Level Setting using Resistance Level

Setting stop loss cfd order above the resistance level

Stop Loss CFD Order Level using Support Level

Setting stop loss cfd order below the Support Level

3. CFDs Trend Lines

A cfd trend-line can be used to set stop-losses where the stop loss cfd order is set just below the cfd trend line. As long as the cfd trend line holds the trader will be able to continue making profits while at the same time set this stop-loss cfd order which will lock his profit once the cfd trend line is broken.

Setting stop loss cfd order below the cfd trendline

Examples of where to set this stop loss cfd order using cfd trend lines.