What is a Stop Loss in Forex?
Stop Loss (SL)
Forex Trading Glossary
Quick Answer: A stop loss automatically closes your trade at a predetermined price to limit losses. It is the most important risk management tool in forex trading.
What is a Stop Loss (SL)?
A Stop Loss (SL) order automatically closes a trade once price hits a predefined level against your position. It protects capital by enforcing a maximum loss per trade.
Best Practices for Stops
- Structure-based: Place stops beyond logical invalidation points.
- Position sizing: Calculate lot size so the stop corresponds to a safe risk percentage.
- Avoid moving stops wider: Doing so usually magnifies losses.
- Account for spread: Especially on stop orders in volatile sessions.
Related Terms
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