Forex Academy:
Middle School
5 minutes
Lesson 9
How to close Buy and Sell positions
- What is a Take Profit order?
- What is a Stop Loss order?
What is a Take Profit order?
In Lesson 8 of the Middle School level,
we introduced the Take Profit order as a convenient way to execute trades.
Click here to learn more about Take Profit in Lesson 8 of the Middle School level.
Now, let’s review the Take Profit order.
Imagine you are holding a Buy position.
The question is: Do you need to keep monitoring the chart until the price goes up?
If you have studied Lesson 8 of the Middle School level, you already know the answer.
The answer is: If you place a Take Profit order, you do not need to keep monitoring the chart.
Example of USD/VND Take Profit order
Set a Take Profit order at 23,000 VND.
When the price reaches 23.000 VND, the Take Profit order will be automatically triggered, closing your position.
You don’t need to constantly monitor the chart to secure your profit!
What is a Stop Loss order?
The opposite of a Take Profit order is a Stop Loss order.
Now, let’s review the Take Profit order chart.
A Take profit order is a preset order placed at a price higher than the price at which you placed your Buy order.
In contrast, a Stop Loss order is a preset order placed at a price lower than the price at which you placed your Buy order.
Question: Why do I have to place a stop loss order?
In Forex trading, a Stop Loss order is considered very important.
In Forex, there are only two types of orders: Buy and Sell. This means that even if you know nothing, your win rate is still 50%.
However, if your win rate increases by just 1%, you can still end up making a profit.
For that reason, you have the possibility of winning and the possibility of losing.
But what truly matters is how you lose.
Let me explain with an example:
Imagine you have $100 in your account balance.
If you lose $20
No problem. Just make a profit of $20 or more on your next trade.
If you lose $100
Your account balance will drop to $0, and you will no longer be able to trade.
With just one loss, you have completely lost the opportunity to make a profit.
However, if you place a Stop Loss order, your losing trade can be automatically closed.
Placing a Stop Loss order is crucial, as it helps prevent significant losses in a single trade.
The lesson on “How to close Buy and Sell positions” ends here.
Watch the tutorial video on how to place an order below.
How to place a Take Profit order for a Buy order
For Android: https://youtu.be/fkTh_RV5SLc
For PC: https://youtu.be/seeriohFifM
How to place a Stop Loss order for a Buy order
For Android:https://youtu.be/HFlVnq2-xuc
For PC:https://youtu.be/1bqhedaQUDc
Let’s check to see if you understand the lesson!
In the next lesson, we will guide you about “How much should I trade?”. Please continue to follow.
If you have any questions, please contact us.