Forex Technical Indicators for Setting Stop losses In Trading
Some Forex trading indicators are used for setting stop losses taking away the need for forex traders to perform complex calculations on where to place these stop loss orders.
A Forex trading systems trader can also place a stop loss order according to these indicators. Some forex technical indicators use mathematical equations to calculate where the order stop loss order should be set so as to provide an optimal exit for a trade. These forex indicators can be used as the basis for setting stop loss orders. These forex indicators follow price action of a currency closely and define the boundaries which the currencies should move along in. When the forex price moves outside these boundaries it is therefore best to close the open forex trades because price stops moving in that particular direction.
Some of the Technical forex indicators that can be used to set stop loss orders are:
Parabolic SAR Indicator - Automatic Stop Loss and Take Profit Indicator
Parabolic SAR is like an Automatic Stop Loss and Take Profit Indicator used to set a trailing price stop loss
Parabolic SAR provides excellent exit points.
In an upward forex trend, you should close long buy trade positions when the price falls below the Parabolic SAR indicator
In a downwards forex trend, you should close short sell trade positions when the price rises above the Parabolic SAR indicator.
If you are long then the price is above the parabolic SAR indicator, the parabolic SAR will move up every day, regardless of the direction in which the forex price is moving. The amount the Parabolic SAR indicator moves up depends on amount that forex prices moves.
Parabolic SAR Indicator for Setting Stops - Automatic Stop Loss and Take Profit Indicator
Picture of parabolic SAR indicator and how this Parabolic SAR indicator is used
Bollinger Bands Indicator - Forex Indicator for Setting Stop Loss Orders
Bollinger bands technical indicator use standard deviation as a measure of volatility. Since standard deviation is a measure of forex volatility, the Bollinger bands are self-adjusting meaning they widen during periods of higher forex volatility and contract during periods of lower forex volatility.
Bollinger Bands indicator consist of 3 bands designed to encompass the majority of a forex trading instruments price action. The middle band is a basis for the intermediate term forex trend, mostly it is a 20 day period simple moving average, which also serves as the base for calculating the upper band and lower band. The upper band's and lower band's distance from the middle band is determined by volatility of the forex price.
Since these Bollinger bands are used to encompass the forex trading instrument price action, the bands can be used to set stop losses just outside the area of the bands.
Bollinger Band Setting Stop Loss Level - Bollinger Bands Technical indicator for Setting Stop Loss Orders
Fibonacci Retracement Areas Indicator - Automatic Stop Loss and Take Profit Indicator
Fib retracement levels provide areas of support & resistance, these can be used to set stoploss levels.
Fibonacci Retracement level 61.80% is the most oftenly used level for setting stop-losses. A stoploss order should be set just below 61.8% Fibo retracement level
The 61.8 % Fibonacci retracement level is used to set these stop loss orders since its rarely hit.
Fibonacci Indicator StopLoss Setting at 61.8 % Fibonacci Retracement Level
Fibonacci retracement level 61.8% - Fibonacci Indicator
Support and Resistance Levels Lines
Support & resistance levels can be used to set stop loss levels where the stop loss orders are set just above or below the support or resistance.
- Buy Forex Trading Trade - Stop Loss order set a few pips below the support level
Buy Forex Trade - Stop Loss set a few pips below the support level
- Sell Forex Trading Trade - Stop Loss order set a few pips above the resistance level
Sell Forex Trading Trade - Stop Loss set a few pips above the resistance level
