Trade Gold Trading

Techniques of Setting Stop-Loss Orders in XAUUSD Trading

Traders using a xauusdtrade system must have mathematical calculations that reveal where to set stop loss & take profit in gold trading.

A trader can also place set stop loss & takeprofits according to the technical indicators used to set these set stop loss order and tp orders. Certain technical indicators use mathematical equations to calculate where the set stop loss and take profit order should be set so that to provide an optimal exit point for trades. These technical indicators can be used as the basis for setting these set stop loss and take profit orders.

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 is dependent upon certain mathematical equations. For example, a ratio of 20 pips gold stop loss can be used by a trader if the trade has potential to make 60 pips in profit: this is a risk:reward ratio of 3:1

Other traders just use a predetermined risk % calculation of their total equity balance.

To set stop loss and take profit in gold trading it is better to use one of the following methods:

1. % of Trading Account Balance

This method is based on the % of account balance that the trader is willing to risk and the risk : reward ratio.

If a trader is willing to risk 2 percent of account balance then the trader decides how far he will set the stop loss order level based on the position size that he has bought or sold - the trader also use the risk reward ratio to calculate where to set 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. Setting Stop Loss Order using Support and Resistance Areas

Another technique to set stop loss & take profit in gold trading is to use supports and resistance zones, on the trading charts.

Given that stop loss orders & tp orders tend to congregate at key points, when one of these levels is tested & touched by the price, others are set off, like dominos. Stop loss orders & take profit orders tend to accumulate just above or below the resistance or 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.

A resistance or support level should be like a barrier for price movement, this is why these resistance and support areas are used to set stop losses & take profits, if this price barrier is breached the price movement can move towards the opposite trend direction of original trade, but if this barriers (support and resistance areas) aren't broken the price will continue heading in the intended direction. This means that these support and resistance zones can be used as good points to set stop loss order & take profit in xauusd.

Stop Loss vs Take Profit Order - Stop Loss Examples Sell Order Buy Order - Take Profit Order Example Sell Order Buy Order

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