best stop loss strategies for forex trading 2025
Stop-Losses can be called the most important factor in preserving our capital and money in the financial markets. Stop-Losses are a tool to protect us from our own risks. Just as the use of stop-losses is essential and important, how to use them is also very important and in this article we want to learn the best strategies for using stop loss orders so that we can take good care of our capital and be profitable.
Now we will examine why we need to use Stop-Loss Orders in our positions. As you know, another name for Stop-Loss Orders is Protective Stop, which means that this tool is designed to protect our capital.
Reasons for using Stop Loss Orders
1_Protecting our capital
As we said before, Stop-Loss orders are a tool to protect our capital and our money. Suppose you have opened a Buy position without using Stop-Loss, but the market starts to move against the direction of your analysis and the price moves sharply downwards and falls. At this point, if the price continues to fall, your capital will be lost because you did not set a Stop-Loss on your position to prevent your loss. Remember that the market does not always move in the direction of our analysis and using Stop-Losses is a very logical and necessary thing to do.
2_Peace of Mind
Calmness is one of the most important factors in trading success and allows us to have high concentration while trading and easily analyze the chart and open our positions. If you set a Stop-Loss for your positions, you can rest assured that your trading capital is safe and you can focus on new positions and chart analysis.
The best stop-loss strategies
Price Action Stop-Loss Model
The best type of strategy for using stop-losses is the price action model because it is a very reliable and calculated method. In this method, you analyze the market structure based on price action and place your stop-loss before an important support or resistance level or a full-body candle.
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As you can see in the example above, in the buy position we opened, we placed the stop-loss below the first strong bullish candle and also below our trend line. This type of stop-loss strategy is called the price action stop loss model.
Trailing Stop Strategy
The Trailing Stop strategy is one of the most popular stop-loss strategies because in this method, we move our stop-loss along with the price movement, allowing us to protect and secure our profits while trading.
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In the example above, when the market makes higher lows and continues its bullish move, we move our stop-loss to behind the higher lows that were made and can do this until we reach our desired profit target.
Fixed Pip Stop-Loss Strategy
One of the most convenient and widely used strategies, especially for amateur traders, is to use stop-losses with a fixed pip value. For example, depending on your style and timeframe, you set your stop-loss 10 pips away from your entry point. This means that for every position you open, you set a stop-loss 10 pips relative to your entry point.
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In the positions above we used a fixed pip stop-loss strategy and set all stop-losses at a fixed pip distance from the entry points. This strategy allows you to easily and quickly set a reliable stop-loss for your positions. Today we learned 3 great strategies for setting stop-losses. You can protect your capital by backtesting these 3 strategies and using the one you feel most comfortable with.
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