Trade Gold Trading

Techniques of Setting Stop-Loss Orders in XAU USD Trading

If you're trading gold with a xauusd system, you need solid math to figure out exactly where to set your stop loss and take profit.

Traders set stop losses and take profits based on chart signals. Some tools use math to pick ideal exit spots. These help close trades at good points. Use indicators to place those stops and targets.

Other traders also place these set stop loss and tp orders according to a pre-determined risk reward ratio specified in their strategy. This method of setting stop loss and tp order depends upon certain math formulas and equations. For example illustration, a ratio of 20 pips gold stop loss can be used by a trader if the Gold trade has potential to make 60 pips in profit: this is a risk:reward ratio of 3:1

Some Traders Set Stop Losses Based on a Fixed Risk Percent of Total Equity.

If you want to set stop loss and take profit in gold trading, it is best for you as a trader to use one of the following strategies:

1. % of Trade Account Balance

This methodology relies on the percentage of the trader's account equity designated for risk, coupled with the established risk-to-reward ratio.

The trader chooses the stop loss order level based on the position size that he has bought or sold if he is willing to risk 2% of his account balance: the risk-reward ratio is also used to determine the location of the take profit order for this trade.

Example:

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

  • If the trader buys 1 contract
    1 pip = $10

    Then setting risk at 2%

    2 % is $200 dollars

    Stop Loss Order = $200 dollars

    If Stop Loss Order = $200 then using risk:reward 3:1 the take profit will be set at $600

2. How to set a stop loss order based on support and resistance areas

An alternative method for establishing stop loss and take-profit levels in gold trading involves utilizing support and resistance benchmarks visible on the charts.

Given that stop loss orders & tp orders tend to accumulate at key points, when one of these technical levels is tested and touched by price, the others are set off, like dominos. Stop Loss orders & take profit orders tend to congregate just above or below the resistance/support levels, respectively. Traders should use these levels to set stop loss and take profit in gold depending on which side of the trade they are in.

Support and resistance levels act as price walls. Traders set stops and targets at these spots. A break can send prices the other way from your trade. If the levels hold, the trend keeps going as planned. Use these zones to place stops and profits in gold trading.

Stop Loss Versus Take-Profit Orders - Illustrative Examples for Sell and Buy Transactions Involving a Take-Profit Order

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