Stop, stop loss was devised to protect the Forex accounts when the market price goes against too large compared to the previous position open. Otherwise it can destroy most of your capital although only on a single transaction.
We should stop in the following cases:
- When you're not sitting on the machine, not directly track the price.
- As market volatility is too strong.
There are several approaches to placing protective stops:
- stops based on swings high / low,
- stops using trend lines,
- Fibonacci related stops, etc.
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