Stop loss concept

I am new to Forex and, just like you are about to say this: “enroll to School of Pipsology for free!!!”, I already did. One thing seems unclear to me, and that placing “Stop loss”. Can anybody elucidate to me what stop losses are all about. I really have difficulty in getting it. Please, help me if you can. Thank you for your magnanimity.

A stop loss is a pending market order that you place, it is equal to the amount of your entry order and in the opposite direction.

You have gone long at 1000, your SL is at 800, i.e. you go short at 800, this takes you out of the market at minus 200, loss of 200, so your stop loss stopped you out, or stopped your loss from becoming any greater than 200.

Then again, the market could go to 799, then back up to 1200 - this time without you, so you were right first time, yet you lose 200.

So stop losses are good because you can define in advance how much you are willing to lose (your risk) but in the wrong place not so good.

It’s all in the school.

If you have a $1000 account & open a trade & the trade goes the opposite way from your prediction, you could quite possible see the following:

-$10
-$50
-$120
-$200
-$385

Yup, your account balance would dwindle until you manually close your trade. Your stop-loss is something that you put in place to automatically close you position. So if you only want to risk $20 then you trade will be closed at -$20.

That’s the bare bones basics of a SL, peterma gives a bit more detail & not to confuse you but a big part of the SL is covered later in the school (location of a stop & the correct position size) so keep studying.

Thank you.

I see you are just started pipschool. You will find a good explanation of stop losses and how to apply them later on, stick with it.
Basically, a stop loss is a figure/position of your choice where you have decided is the maximum amount you are prepared to lose on a trade. You need to decide this before you enter a trade, as the price can move against you very quickly.
Good luck

Very well explained! SL’s can benefit and hurt you just as any other trading tool can do. You need to learn how to use the tools properly. While a SL can prevent large losses it can also slowly bleed your account out so if you face minor loss after minor loss it shows that your strategy is not functioning and that you need to work on other aspects of trading as well.