Methods of Setting Stop Loss Oil Trading Orders In Crude Oil Trading

Traders using a oil system must have mathematical calculations that reveal where the order must be placed.

A trader can also set a stop-loss oil trading order according to the indicators used to set these orders. Certain technical indicators use mathematical equations to calculate where the stop loss crude oil order should be set so as to provide an optimal exit point. These trading technical indicators can be used as the basis for setting these orders.

Other traders also place these orders according to a predetermined risk to reward ratio. This method of setting is dependent upon certain math equations. For example a ratio of 50 pips stop loss can be used by a trader if the trade has the potential to make 100 pips in profit: this is a risk : reward ratio of 2:1

Others just use a predetermined percent of their total trading account balance.

To set a stop loss order it is best to use one of the following techniques:

1. Percent of Oil trading account balance

This is based on the percent of account balance that the trader is willing to risk.

If a trader is willing to risk 2% of account balance then the trader decides how far he will set the order level based on the trade position size which he has bought or sold.

Example:

If a trader has a $100,000 account & is willing to risk 2% then the position size of the trade that they will open for Oil Trading will be determined by this 2% stop loss level.

2. Setting Stop Loss Oil Trading Order using Support and Resistance Levels

Another way of setting stop loss crude oil orders is to use supports and resistance areas, on the charts.

Given that stop loss oil trading orders tend to congregate at key points, when one of these levels is touched by the oil price, others are set off, like dominos. Stop loss orders tend to accumulate just above or below the resistance or support levels, respectively.

A resistance or a support level should act like a barrier for crude oil price movement, this is why they are used to set stop losses, if this barrier is broken the crude oil price movement can go towards the opposite direction of the original oil trade, but if this barriers (support & resistance levels) are not broken the crude oil price will continue heading in the intended direction.

Stop Loss Oil Trading Order level using a resistance level

Setting order above the resistance

Stop Loss Oil Trading Order level using a support Level

Setting order below the Support Line

3. Crude Oil Trendlines

A oil trend line can be used to set stop losses where the order is set just below the oil trend line. As long as the oil trend line holds the trader will be able to continue making trading profits while at the same time set this order that will lock his profit once the oil trend-line is broken.

Setting order below the oil trend-line

Example of where to set this order using oil trend lines.