stop-loss

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A stop-loss (abbreviated SL) is a trading order, which is set beforehand, to close a trade if it goes in the adverse direction and reaches some predetermined level. For a buy trade (long position), a stop-loss would be set below the entry level. For a sell trade (short position), a stop-loss would be set above the entry level. However, a stop-loss can also be set to safeguard some amount of profit for a profitable position. It can be set below the current rate but above the entry level for a buy trade and above the current rate but below the entry level for sell trade. Using a stop-loss in Forex is very important. The posts below discuss the use of a stop-loss in trading and describe various ways to set stop-loss.

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