A stop loss is an order you give to your broker to “stop losses”.
The golden rule of stock market speculation is to keep risk under control at all times. To do this, you must know how much you are willing to lose before you buy your shares.
Once you know or decide that figure, you will give an order to your broker to open the position.
In addition, immediately after you give the order to buy, you must also leave a stop loss, which is a sell order that will only be executed if the price falls enough to cause you your maximum allowable loss. In which case, your shares will be sold before you suffer any further damage.
You should know that orders that are not executed are free; so controlling the risk in your stock trading won’t cost you anything, but it will save you a lot of trouble.
Trading the stock market without a stop loss is like driving a car without brakes. Always use a stop loss.
Take Profit is a trading order that allows setting the profit level at a certain amount when the price reaches this level. This command helps to reduce the risks. If a trader sets a Take Profit command on a given trading instrument, when the instrument’s price reaches the specified price level, the position will be closed automatically. A take-profit command can be set at any time during an open position.
A trailing stop is an algorithm that serves to control a stop loss order; so that the stop loss changes according to the price movement and our situation in the market. It works according to the following scheme:
- Let’s say you set a trailing stop of X pips for an open position. No change will be made to your order until the profit on your open position exceeds X pips.
- Once the profit on your position exceeds the trailing stop value (X pips, the break-even point in this case) a stop loss order will be placed at X pips from the current price.
- Every time the price exceeds a level of X pips (of profit) in relation to the established stop loss order, the server will send an order to move the stop loss, placing it at a distance of X pips (the level of your trailing stop) from the current price.
The trailing stop is managed by the client’s trading platform, while the stop loss and take profit orders are controlled by the server. Therefore, a trailing stop will only remain active when MetaTrader is running and connected to the Internet. Once you close MetaTrader, the trailing stop will be deactivated; however, your stop order will remain active, assuming it was placed before the trailing stop.
In order for the EA to work 24 hours a day, the computer where it is installed must be turned on 24 hours a day with a suitable internet connection. If it suffers a power failure or a loss of Internet connection, the EA will stop and its balance may be affected. For this reason, we recommend, imperatively, that you use a VPS Server. This is an external server, which will operate 24 hours a day, in which you will install the EA. It will no longer matter if you have your computer on or not. The EA will run continuously.
We recommend using the VPS that we have been working with for years. A VPS already tested and guaranteed 99.99% of uninterrupted operation, with a configuration suitable for our EA.