CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

MT4: Stop Loss, Take Profit & Trailing Stop

BASIC - Lesson 7

As we’ve already explained in our Basic terms and vocabulary tutorial, one of the keys to achieving success in financial markets over the long term is prudent risk management. That’s why stop losses and take profits should be an integral part of your trading.

This lesson takes approximately: 15 minutes

*Since the recording of these videos, negative balance protection has come into force from 02.10.17. This means that whilst trading losses cannot exceed funds in your account, your capital is still at risk.

In this lesson, you’ll learn:

  • How to set up a stop loss on MT4
  • How to set up a Take Profit level
  • What a trailing stop is and how to use one

As we’ve already explained in our Basic terms and vocabulary tutorial, one of the keys to achieving success in financial markets over the long term is prudent risk management. That’s why stop losses and take profits should be an integral part of your trading.

So let’s have a look how to use them on our MT4 platform to ensure you know how to limit your risk and maximise your trading potential. 

 

Setting Stop Loss and Take Profit

The first and the easiest way to add Stop Loss or Take Profit to your trade is by doing it right away when placing new orders.  

Simply enter your particular price level in Stop Loss or Take Profit fields. Remember that Stop Loss will executed automatically when the market moves against your position (hence the name: stop losses) and Take Profit levels will be executed automatically when the price reaches your specified profit target. So you’re able to set your Stop Loss level below the current market price and Take Profit level above current market price.          

 

It’s important to remember that a Stop Loss (SL) or Take Profit (TP) is always connected to an open position or a pending order. You can adjust both once your trade has been opened and you’re monitoring the market. It’s a protective order to your market position but of course they are not necessary to open a new position. You always can add them later, but we highly recommend to always protect your positions*.  

Adding Stop Loss and Take Profit levels

The easiest way to add SL/TP levels to your already opened position is by using trade line on the chart. Simply drag and drop the trade line up or down to specific level.

 

Once you’ve entered SL/TP levels the SL/TP lines will appear on the chart. This way you can also modify SL/TP levels simply and quickly.

You can also do this from the bottom ‘Terminal’ module as well. To add or modify SL/TP levels, simply right-click on your open position or pending order and choose ‘Modify or delete order’.

The order modification window will appear and now you’re able to enter/modify SL/TP by the exact market level or by defining the points range from the current market price.   

Trailing Stop

Stop Losses are intended for reducing losses when the market moves against your position, but they can help you lock in your profits as well.

If that sounds confusing - don’t worry, it’s very simple to understand.

Let’s say you’ve opened a long position and the market moves in the right direction, making your trade a profitable one at present. Your original Stop Loss, which was placed at a level below your open price, can now be moved to your open price (so you can break even) or above the open price (so are guaranteed a profit).

To make this process automatic, you can use a Trailing Stop. This is a really useful tool for your risk management, particularly when price changes are rapid or when you’re unable to constantly monitor the market. As soon as the position turns profitable, your Trailing Stop will follow the price automatically, maintaining the previously established distance.

Following the example above, please bear in mind however that your trade needs to be running a profit large enough for the Trailing Stop to move above your open price, before your profit can be guaranteed.

Trailing Stops (TS) are attached to your opened positions but it’s important to remember that if you have a trailing stop on MT4, you need to have the platform open for it to be successfully executed. However, if you are trading on xStation, your Trailing Stops are in place even if you log out.

To set a trailing stop, right-click the open position in the ‘Terminal’ window and specify your desired pip value of distance between the TP level and the current price in Trailing Stop menu.

Once you’ve done this, your Trailing Stop is now active. This means that if prices change to the profitable market side, TS will ensure the stop loss level follows the price automatically.

Your Trailing Stop can be easily disabled by setting ‘None’ in trailing stop menu. If you want to quickly deactivate it in all opened positions, just select ‘Delete All’.

As you can see, MT4 provides you with plenty of ways to protect your positions in just a few moments.   

 

*Whilst stop loss orders are one of the best ways to ensure your risk is managed and potential losses are kept to acceptable levels, they don’t provide 100% security.

Stop losses are free to use and they protect your account against adverse market moves, but please be aware that they cannot guarantee your position every time. If the market becomes suddenly volatile and gaps beyond your stop level (jumps from one price to the next without trading at the levels in between), it’s possible your position could be closed at a worse level than requested. This is known as price slippage.

Guaranteed stop losses, which have no risk of slippage and ensure if a market does move against you, the position is closed out at the stop loss level you requested, are available for free with a basic account.

Quiz

Test your knowledge of this lesson with our quiz:

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The trailing stop on MT4 will be executed when:

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Which orders can be placed or edited right from the chart on MT4?

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If you have a short or ‘sell’ position open, you’re allowed to place a stop loss:

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