Trade execution
Stop Loss and Take Profit in Forex
Place stops where the thesis is invalidated and targets at logical levels rather than arbitrary distances.
Answer first
What you should remember
- A stop proves the thesis wrong; it is not merely a cash limit.
- Size adapts to the stop, not the other way around.
- A target needs structure, liquidity or reward that justifies risk.
A market-based stop
Place the stop beyond a level whose break or reclaim invalidates the setup. A stop inside normal noise is repeatedly hit; an unjustifiably wide stop disguises a weak trade.
Selecting a target
Logical targets include prior highs or lows, liquidity pools and range boundaries. Check whether obstacles before the target still allow adequate reward relative to the stop.
Management after entry
Write break-even and partial-profit rules before entry. Moving too early can remove a valid trade, while protecting nothing after context changes can return a large gain to zero.
Slippage and gaps
A stop does not always guarantee its exact execution price during news or thin liquidity. Conservative sizing and awareness of major releases help manage this risk.
Direct answers
Frequently asked questions
Should I move a stop farther when price approaches?
Not merely to avoid a loss; doing so changes risk and breaks the plan's logic.
Must every trade use a fixed target?
A structural target or trailing method can work, but the rule must be defined and testable.