Methods of Setting Stop Loss in Gold Trading

Traders using a Gold tradingtrade system must have mathematical calculations that reveal where their stop loss order must be placed.

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

Other online Gold traders also place these stop loss orders according to a predetermined risk to reward ratio. This method of setting these orders is dependent upon certain mathematical calculations based on Gold chart price movements. For example a ratio of 50 pips stoploss order can be used by a gold trader if the trade position has potential to earn 100 pips in profit: this is a risk : reward ratio of 2:1. Also, a ratio of 30 pips stoploss order can be used by a xauusd trader if the trade has potential to earn 90 pips in profit: this is a risk : reward ratio of 3:1

Other traders just use a pre determined percentage% of their total trading equity balance.

To set a stop loss it is best to use one of the following methods:

1. % of trading equity balance

This method is based on the percentage% of the account balance that the trader is willing to risk on any one single Gold trade. If a trader is willing to risk 2% of their trading account balance - then the trader determines how far he will set the stop loss order level based on the position size that he has bought or sold.

Example:

If a trader has a $100,000 account and is willing to risk 2%

If the trader buys 5 contracts

1 pip = $5

Then setting at 2%

2 % is $2,000 dollars

2000 /5 = 400 pips

Stop loss = 400 pips

If the trader buys 10 contracts

1 pip = $10 dollars

Then setting the stop at 2 %

2 % is $2,000 dollars

2000 /10 = 200 pips

Stop loss = 200 pips

If the trader buys 20 contracts

1 pip = $20 dollars

Then setting at 2 %

2 % is $2,000

2000 /20 = 100 pips

Stoploss = 100 pips

2. Setting Stop Loss using Support and Resistance Zones

Another way of setting stop loss orders is to use supports & resistance levels, on the XAUUSD charts.

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

A resistance or a support zone should be like a barrier point for Gold price movement, this is why the levels are used to place stop losses, if this barrier is broken then the Gold price movement can move towards the opposite direction of original Gold price trend, but if this barriers (support & resistance levels) aren't broken, then the XAUUSD price will continue heading in the intended direction.

Stop Loss Order Setting using a Resistance Level

Methods of Setting Gold Trading Stop Loss in XAUUSD Trading Explained - XAUUSD Gold Stop Loss Order Setting

Setting Stop Loss Orders above the Resistance Level

Stop Loss Order Setting using a Support Level

Methods of Setting Gold Trading Stop Loss in XAUUSD Trading - Gold Trading Stop Loss Order Setting Methods

Setting Stop Losses below the Support Zone

3. Setting Stop Losses Using Trend Lines

A trend line can be used to set stop losses where the order is set just below the trend line in an upward trend and above the trendline in a downwards trend. As long as the trendline holds then a xauusd trader will be able to continue making profits while at the same time setting this stop loss order that will lock his profit once the trendline is broken.

Methods of Setting Gold Trading Stop Loss in XAUUSD Gold Trading - XAUUSD Gold Trading Stop Loss Order

Setting the stop loss order below the Gold price trend-line

Example of where to set this stop loss order using trendlines in an upwards trending XAUUSD market.

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