Indicators For Setting Stop losses In Trading

Some indicators are used for setting stop losses taking away the need for traders to perform complex calculations on where to place these stop loss orders.

A systems trader can also set a stop loss order according to these indicators. Some technical indicators use mathematical equations to calculate where the order stop loss order should be set so as to provide an optimal exit for a trade. These indicators can be used as the basis for setting stop loss orders. These indicators follow price action of a currency closely and define the boundaries which the currencies should move along in. When the price moves outside these boundaries it is therefore best to close the open trades because price stops moving in that particular direction.

Some of the Technical indicators that can be used to set stop loss orders are:

Parabolic SAR Indicator - Automatic Stop Loss And Take Profit Indicator

Parabolic SAR is like an Automatic Stop Loss And Take Profit Indicator used to set a trailing price stop loss

The Parabolic SAR provides excellent exit points.

In an upward trend, you should close long buy trade positions when the price falls below the Parabolic SAR indicator

In a downward trend, you should close short sell trade positions when the price rises above the Parabolic SAR technical indicator.

If you are long then the price is above the parabolic SAR indicator, the parabolic SAR will move up every day, regardless of the direction in which the price is moving. The amount the Parabolic SAR indicator moves upwards depends on the amount that trading prices moves.

Parabolic SAR Indicator for Setting Stops - Automatic Stop Loss And Take Profit Indicator

Picture of parabolic SAR indicator and how this Parabolic SAR indicator is used

Bollinger Bands Indicator - Indicator for Setting Stop Loss Orders

Bollinger bands technical indicator use standard deviation as a measure of volatility. Since standard deviation is a measure of volatility, the Bollinger bands are self-adjusting meaning they widen during periods of higher forex volatility and contract during periods of lower forex volatility.

Bollinger Bands indicator consist of 3 bands designed to encompass the majority of a forex instruments price action. The middle band is a basis for the intermediate term trend, mostly it is a 20 day period simple MA, which also serves as the base for calculating the upper band and lower band. The upper band's and lower band's distance from the middle band is determined by volatility of the price.

Since these Bollinger bands are used to encompass the instrument price action, the bands can be used to set stop losses just outside the area of the bands.

Bollinger Band Setting Stop Loss Level - Bollinger Bands Technical indicator for Setting Stop Loss Orders

Fibonacci Retracement Levels Indicator - Automatic Stop Loss And Take Profit Indicator

Fibonacci retracement levels provide areas of support and resistance, these can be used to set stop loss levels.

Fibonacci Retracement level 61.8% is the most oftenly used level for setting stoplosses. A stop loss order should be set just below 61.8% Fibonacci retracement level

The 61.8 % Fibonacci retracement level is used to set these stop loss orders since its rarely hit.

Fibo Indicator StopLoss Setting at 61.8 % Fibonacci Retracement Level

Fibonacci retracement level 61.8% - Fibonacci Indicator

Support & Resistance Levels Lines

Support & resistance levels can be used to set stop loss levels where the stop loss orders are set just above or below the support or resistance.

• Buy Trade - Stop Loss order set a few pips below the support level

Buy Trade - Stop Loss set a few pips below the support level

• Sell Trade - Stop Loss order set a few pips above the resistance level

Sell Trade - Stop Loss set a few pips above the resistance level