How to correctly install stop loss and take profit?

Each trader has his own trading strategy, which should regulate each action of the manager. I strongly recommend using the basic principles of creating a trading strategy to turn a chaotic approach into a system business.

The trading strategy, without fail, should consist of the following blocks:

1. Rules for determining the entry position point;

2. Rules for determining exit points from a transaction;

3. Risk and money management parameters.

In my blog, I have already written about the first and third point, so today we will analyze the second one.

It’s not a secret that there are only two exit points: with a loss or with a profit. In this issue, fix api trader experiences stop loss and take profitlevels. As I already wrote above, the trading strategy will help you understand exactly where to place these levels, which should be clearly state where to set these exit levels from the transaction. They are individual for each trader. I will help you determine the points of these zones exposure based on the key and basic rules. Thus, where they should be, in order to work correctly and safely.

Stop loss

This level allows you to limit losses in the context of a trade operation. Most traders have difficulties exactly with stop loss. I would not even say difficulties, but rather a refusal to place it in a trading operation. For some reason, many do not place stop loss in their system and over time simply lose their money and get disappointed from the fix api trading. Sometimes, you may not install take profit, but SL should present in each operation.

There are 3 types of correct stop loss placement:

  • Taking into account the risk in each transaction. With this type, the exit from the position will be implemented when the maximum percentage of loss is achieved. For example, if you have a transaction risk of 1% and a deposit of $10,000, then when the deal reaches $100, it will be closed. Thus, SL is set based on a round figure loss.
  • After triggering a turn signal or reaching the system indicator. If you have opened a position for sale but the quotes have entered the channel and all the signals have already changed, it is reasonable to close the position if the TS already points to the purchase (
  • Behind the local highs or lows. When you have opened trading operations for sale, SL should chase a local maximum, the breakdown of which will be a signal for a trend reversal. The case is similar when there are purchases. This is a kind of analogue of the second point but it is more stable and is used by the fix api traders regardless of the system.

Take profit

As for this level, it acts in opposite proportion to the SL –it restricts profits in the context of one trade operation. I recommend to set TP for each trade operation. But there are exceptions, in which TP does not need to be put. Often, they are connected with the fact that the reason for closing position is a reverse signal or trailing stop of the opened positions.

There are also 3 Take Profit methods for setting the level:

  • As SL ratio. This is one of the most popular techniques. We know that the trader’s work is aimed at a positive mathematical expectation. If the SL to TP ratio in the working strategy is not less than 1/4, and better than 1/6 or 1/7, then the MO will be positive. So the trader opens deals with volume from risk, and the take is determined by simply multiplying by 5-6 from SL.
  • Installation under local support and resistance level. If a purchase transaction is opened, it makes sense to install the TP under the resistance level. If it is a sale, then above the support level.
  • At achievement of technical indicators or Fibo level. Everything is simple. The purpose is the level or values ​​of the technical element.

Placing these levels at opening of trading positions will allow you to save the capital. After all, the original purpose is safety of means, and only then their augmentation. If your system has a positive mathematical expectation, use these levels, and you are guaranteed to get a stable result.

Even algorithmic trading strategies for fix apiforex have the logic of exit from the market ( Thus, those parameters in which the robot bury transactions “in plus” or “in minus.” This allows you to save funds and control risks. This is the main reason for the stability of robots. After all, they will not move these levels and “be greedy.” But the trader may do it. And if you learn to work by installing stop loss and take profit, this will allow you to reduce the psychological burden. You will have to take care only for the strategy and its principles of opening a deal and the parameters of capital management.


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