Stake strategiesUpdated 3 min readBy the FXNOD team
Stop loss and take profit: what they are and how to set them
A stop loss is an instruction to stop at a chosen loss, and a take profit is an instruction to stop at a chosen gain. On a single position they close the trade at a price or amount. On a bot they end the whole session. Both are decided before trading starts, when you are calm, and should not be moved once it has.
Two kinds
| On a position | On a bot session | |
|---|---|---|
| Stop loss | Closes one trade when its loss reaches a level | Ends the run when total loss reaches an amount |
| Take profit | Closes one trade when its profit reaches a level | Ends the run when total profit reaches an amount |
| Applies to | CFDs and multipliers | Any contract a bot buys |
A fixed-payout option has neither on the trade itself: it settles at expiry and the stake is the most it can lose. For options, the limits that matter are the session's.
Setting a stop loss
Start from money
The amount you can lose today without it mattering tomorrow.
For a position, put it where the idea is wrong
Beyond the level that, if broken, means your reason for the trade no longer holds.
Size the trade to fit
Position size equals the money at risk divided by the stop distance.
For a bot, keep the stake small against it
A stake of 1% to 2% of the session stop loss.
Setting a take profit
On a position, a target of at least the stop distance gives a risk-to-reward of 1:1 or better. On a bot session, a target ends the run while it is ahead. Smaller targets are reached more often and larger ones less often; neither changes the expected result of the trades, but a target does stop a winning session being given back.
What a stop loss does not do
- It does not guarantee the exact amount. A position's stop can slip in a fast market.
- A session stop checked before each trade can be passed by the final trade's stake.
- It does not protect you from starting another session straight afterwards.
- A stop loss that runs in your browser stops working when the browser does.
Mistakes
- Moving the stop further away when the price approaches it.
- Setting it so close that normal movement triggers it.
- Using none, and planning to watch the trade.
- With a rising stake, a session stop smaller than the ladder it is meant to contain.
In FXNOD
In Trade Pilot, Multipliers let you set a stop loss and a take profit, and Accumulators a take profit. In Bot Forge and Auto Hub a session stop loss is required and a profit target is optional. Both are checked on FXNOD's servers before every trade, so they keep working with the page closed. Because the check comes before each order, the last trade can take the loss past the stop by up to its stake.
Questions people ask
- Should I always use a stop loss?
- Yes. Without one, the only limit on a loss is your balance and your attention.
- Why did I lose more than my stop loss?
- On a position, the price may have gapped past the level. On a bot, the limit is checked before each trade, so the last trade can exceed it by its stake.
- What is a good take profit?
- One that is at least as large as the amount you risk, and that you decide before trading and do not change.
See the stakes before you start
Bot Forge shows the stakes of a losing streak before a bot runs, will not start without a stop loss, and caps the largest stake. Try any stake setting on your Deriv demo account.
Get started