For the Forex market, different types of orders play an important role in helping traders make profits. One of them is the Sell Stop Order, also known as the Sell Stop order. So what is the Sell Stop order in Forex? What trading advantages does it bring to investors? Let’s Learn Forex Trading to learn the concepts and useful knowledge related to this type of order in the article below.
What is Sell Stop Order in the Forex market?
A sell stop order in the Forex market is a type of pending order that allows traders to place a sell order at a lower price than the current one. The order will be applied when investors expect the price to reach a certain level and it will continue to decrease in the future. Until the expected price is reached, the account will automatically match the order.
This type of sell-stop limits often used by traders who sell following market momentum. Because it moves in the same direction as the price, that is, investors predict that the market price may drop near a certain support level. But they are wondering whether the price can break this support line or not. To catch the price trend beyond the support zone, traders will place a Sell Stop Order .
See more: Learn sell stop to increase success rate
Meaning of Sell Stop Forex order type
If you are a genuine trader, you will understand the meaning of this type of Sell Stop Forex order. However, for newbies, this must be a rather vague aspect. Normally, Sell Stop will be rarely used, because it carries some potential risks. But in some cases, it plays an extremely useful role for traders.
It is shown when traders predict that the market price will drop sharply and break the resistance level. Because the market will have a very large volume during this period, it is not possible to determine when the price will decrease. At the same time, in case traders do not have time to monitor the market. The sell stop limit will work to help traders not miss their ideal trading opportunity.
Why should traders use the Sell Stop order in Forex?
To compare with other types of orders in the Forex market such as: Stop Loss orSell Stop Limit… Sell Stop is more risky to use. But if you know how to choose the appropriate time to enter an order, it will bring traders a huge source of profit. A few other prominent reasons why you must use the Sell Stop Forex order to trade are:
- The sell stop limit will be placed at a level lower than the current price. If the order is not matched as predicted, it will also reduce some risks for traders.
- Using Sell Stop in Forex helps you save time monitoring the market. But you can still seize trading opportunities when the price drops like guessing.
- When the market fluctuates due to news, prices decrease. To stay ahead of the trend, traders can use the sell-stop limit.
- Sell Stop Order is suitable for subjects following the Breakout field. It helps traders stay ahead of the trend extremely well in predicting the price will decrease and break the support line.
Some notes when trading with Sell Stop Order
If you want to use the sell-stop limiting Forex most effectively. Don’t forget to remember and apply the following important notes:
- The Sell Stop order can help traders sell assets at the desired price without having to constantly monitor the market.
- Traders can edit or cancel pending Sell Stop orders before the order is matched.
- When using this type of order, traders need to patiently wait for the order to be matched.
- Do not rely on orders because it will cause you to miss the opportunity to enter orders.
- To avoid being stopped hunted, traders should lower the sell point to minimize risk.
- Research the market and review fluctuations carefully before entering a sell stop limit
When should I use Sell Stop Order to trade?
When entering a trading order, for any order (including Sell Stop Order ), it is very difficult to avoid a false breakout or a price retest of the breakout zone. Therefore, investors need to be careful when choosing the time to enter the price. Some ideal situations to use Sell Stop Forex include:
- Price breaks important price zones or breaks the lower edge of triangles, pennants and rectangles. Because this is when the breakout is easy to be accurate, the sell stop limit will also be safe.
- There is important new news on the market that causes prices to fluctuate extremely strongly. Using the Sell Stop order to stay ahead of the trend is extremely smart and safe.
- Sell Stop can be applied to traders who do not have time to monitor the market. Helps traders capture trading opportunities and save time to do other important things.
- If you are a trader affected by Fomo syndrome, you should use Sell Stop. It will help you overcome the disadvantages of profit taking when a small profit arises. Because you don’t need to monitor the market, you won’t be psychologically motivated to close orders.
Strategies for using sell stop limit effectively
Besides, traders can apply a number of additional strategies to make trading more effective. Eg:
- Nail-spreading strategy: This is a safe strategy that is suitable for all types of pending orders. When using Sell Stop Order instead of investing once with a large volume, you can divide it into several parts. Then, spread orders at many different points until you run out of capital. Although it does not bring high profits, it is quite safe.
- Sell Stop Strategy when the market is Sideway: To use Sell Stop in this case requires you to make more breakthrough decisions. If the price has broken out of the Sideway zone and dropped below the resistance line. At this point, traders can start placing the sell stop limit a little below the resistance line. At the same time, use the Take Profit order to take profit 1R – 2R away from the order line. And commands Stop Loss Cut loss before support line 1, section 1R – 2R.
See more: Instructions for registering an XTB account
Distinguish between Sell Limit and Sell Stop orders
If you have used Sell Stop Order , you have probably heard of the Sell Limit order. Although Sell Limit and Sell Stop are the same type of sell order, their nature is completely different. You can distinguish them based on the following comparison table:
| Criteria | Sell Stop Order | Sell Limit Order |
| Matching price | The level is lower than the current price on the market | The level is higher than the current price on the market |
| Point to enter order | In the same direction as the price and traders will enter orders when the price drops sharply and breaks the support line. | The price goes against the direction, and the trader will wait for the price to rise to the resistance point before entering the order. |
Instructions for installing Sell Stop Order on MT4 platform for newbies
So, how do we install the sell stop limit in Forex on MT4? If readers cannot solve this problem, please refer to the next information paragraph.
First you need to download the MT4 platform to your trading device. Then, follow these two simple steps to install the Sell Stop order:
- Step 1: Press “New Order” or shortcut F9 to open a new order. Select “Pending Order” => Select “Type” => Click “Sell Stop”.
- Step 2: Set parameters and values according to the form. Including items: Price, Stop Loss and Take Profit => Click “Place” to confirm the order.
summary
So, in the article above Learn Forex Trading has provided readers with data about the commandSell Stop Order. Hopefully, you understand clearly what the Sell Stop concept is and know how to enter an order effectively. To add more related knowledge, follow our website and update information in many other articles.
FAQs:
What strategy should be applied when using Sell Stop Forex?
Traders can use two strategies to enter the sell stop limit: spreading spikes and Sideway.
Are Sell Limit and Sell Stop orders the same?
No, even though it is the same sell order, Sell Limit will execute the order when the price is higher than the market price. Conversely, Sell Stop will match orders when the price is lower than the market price.
Should I use the sell-stop limit to trade?
Yes, although the sell stop limit can be risky, if you know how to choose the right time, it will bring you a huge source of profit.
