Methods of Setting Stop Loss Trading Orders In Crude Oil

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

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

Other traders also place these orders according to a predetermined risk to reward ratio. This technique of setting is dependent upon certain math equations. For example 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

Others just use a predetermined percent of their total account balance.

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

1. Percentage of account balance

This is based on the percent of account balance that the trader is willing to risk.

If a trader is willing to risk 2 percent of account balance then the trader determines how far he will set the order level based on the trade position size which he has bought or sold.

Example:

If a trader has a $100,000 account & is willing to risk 2% then the position size of the trade that they will open for Oil Trading will be determined by this 2% stop loss level.

2. Setting Stop Loss Crude Oil Order using Support and Resistance Levels

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

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

A resistance or a support level should act like a barrier for crude trading price movement, this is why they are used to set stop losses, if this barrier is broken the crude trading price movement can go towards the opposite direction of the original oil trade, but if this barriers (support and resistance levels) are not broken the price will continue heading in the intended direction.

Stop Loss Trading Order level using a resistance zone

Setting order above the resistance

Stop Loss Trading Order level using a support Level

Setting order below the Support Line

3. Oil Trend Lines

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

Setting order below the trend-line

Examples of where to set this order using trend lines.