Stop Loss Oil Trading Order Summary: Points To Remember When Putting

The key to placing stop orders in oil trading isn't to set too tight or too far & not exactly on the support or resistance levels.

A few pips below support or above resistance zones is the best place.

If you are going long (buying a oil trading instrument), just look for a nearby support level that is below your trade entry point and put this order about 10 pips to 20 pips below that support level. The example explained below show the level where one can put their stop orders just below the support level on a crude oil trading chart.

Support Level For Setting StopLoss Oil Trading Order Level For Buy Trade

If you are going short (selling a oil trading instrument), just look for a nearby resistance level which is above your entry point & set this stop order about 10 pips to 20 pips above that resistance level. The example explained below show the level where one can put their stop orders just above the resistance level on a crude oil trading chart.

Resistance Level For Setting Stop Loss Oil Trading Order Level For Sell Trade

You can also use stop loss oil orders to lock in profits, Not Just for Preventing Losses

The advantage of a stop loss crude oil trading order is that you do not have to monitor on a daily basis how the crude oil market is performing. This is especially handy when you're in a situation which prevents you from watching your transactions for an extended period of time, or when you want to go to relax after trading the whole day.

The disadvantage is that the crude oil price at which you set these orders could be activated by a short-term fluctuation in crude oil price. The key is picking a stop order percentage that allows crude oil price to fluctuate within the day to day range while preventing the downside risks.

These oil orders are traditionally thought of as a way to prevent losses thus the name. Another use of these stop orders is to lock in the profits, in which case it's referred to as a trailing stop loss.

For a trailing stop loss order it's set at a percentage level below the current market oil price. This trailing level then adjusted as the trade transaction unfolds. Using a trailing stop loss level allows you to let the profits run while at the same time ensures that should the crude oil market turn you will have locked in some of your profits.

These oil orders can also be used to eliminate risk if a Oil trade transaction becomes profitable. If a trade position makes some reasonable gains then the stop loss can be moved to break even point, the place at which you bought, thereby ensuring that even if the trade transaction moves against you, you'll not make any loss, you will break even on that trade.

Trailing stop oil orders are used to maximize & protect profit as crude oil price rises and limit losses when the crude oil price falls.

A good examples is when you use the parabolic SAR Crude Oil Indicator & keep moving your stop order to the parabolic SAR level.

Parabolic SAR Oil Technical Indicator for Setting Trailing StopLoss Oil Trading Order in Oil Trading

Another example is where one moves his stop loss order by a certain number of pips after every few hours or after each hour or after every 15 min depending on the Oil Trading chart timeframe that the trader is using.

In the crude oil trading example above the parabolic SAR Indicator which had a setting of 2 & 0.02 was used as the trailing stop loss for the above chart. The trader would have kept moving the trailing stop loss order level upwards after every SAR was drawn until the time when the Parabolic SAR Indicator was hit & the oil trend reversed.

ConclusionA stop loss order is a simple tool, yet so many investors fail to use it. Whether it's used to prevent excessive losses or to lock in profits, nearly all investing styles can benefit from this tool.

Points To Remember When Putting These Stop Orders

Here are some important points to remember:

• Be careful with the points where you set these stop loss orders. If oil normally fluctuates 20 points, you do not want to put your top loss order too close to that range else you'll be taken out by normal market volatility

• Stop Loss Oil Trading Orders take the emotion out of a trading decisions and by setting one you set a pre determined point of exiting a losing trade, meant to control losses.

• Traders can always use indicators to calculate where to put these regions, or use the concepts of Resistance & Support to work out where to put these stop orders. Another good technical indicator used to set these stop loss orders is the Bollinger bands where traders use the upper & lower band as the limits of crude oil price therefore putting these orders outside the bands.