Stop Loss is a valuable risk management technique accessible on the eToro platform that enables users to lower the possibility of losses in an open position.
It is compulsory for all positions apart from non-leveraged buy positions. It prevents unnecessary losses above the quantity selected when the price change is against you by immediately terminating the exchange. Once this choice has been correctly utilized, it can provide better trading advantages. The principle can be used for both short-term and long-term investments. It is an automated order for an investor to position a certain quantity of brokerage with the broker/agent. It is used to reduce the loss or gain of a transaction.
Stop-Loss (SL) is a risk mitigation tool that is designed to increase the security of your investments.
It is an instruction to terminate a deal at a specific cost if the price is against you to avoid additional damages. Stop-loss is also described as ‘stop order’ or ‘stop order.’ By imposing a stop-loss order, the investor shall command the broker/agent to sell the security when it exceeds a pre-set price cap. If the market hits your desired rate and you have missed the estimated sum, the stop loss will activate and shut your place instantly. Under normal working conditions, the stop loss set is not assured. If the market fluctuates, the stop-loss level you sought cannot be exchanged on the market. In this scenario, the stop-loss will be triggered at the next available rate. As a consequence, you might sacrifice more than you have been prepared to sell.
eToro helps you to settle on the cut-off point to prevent the failure of the places you are exchanging on the preferred resource. The default stop loss for most transactions is 50 percent of the position number. In other sentences, if the value of your position decreased to 50percent of the investment made, the stop loss will activate, and the position will end automatically. Stop-loss can be selected as a numerical number, but you can also see the percentage that the stop loss sum reflects in the overall value of your investment in a position. When the market shifts against your favor in a deal, an automated order to terminate the transaction is sent.
Trailing Stop Loss (TSL) is an additional feature available on the platform that is more versatile than the conventional stop-loss function and has been added as a response to consumer reviews. Use this function to adjust the stop loss number to a fixed amount of pips around the market value level i.e. higher or lower it, based on whether your place is long (buy) or short (sell). It states that the value of the stop loss will be changed proportionately as the market moves in a preferred manner. The stop loss will increase proportionally as the demand increases, and the difference between the price at the time and the price permitted by the stop loss value is set. However, if the market movements are against you, the value of the stop losses will not be changed, and thus the place will be eliminated until the peak loss sum is exceeded.
Procedure of Setting the Stop Loss
To know how to set stop loss on etoro you have to follow some steps and these are given below.
- Press on “STOP LOSS” to configure your SL to a particular market price. Type a pace, or use the + and – buttons to change a single-pip SL at a moment.
In this case, the SL is set to the X rate. So, if the value falls to X, the Stop Loss activates and closes the place automatically.
- You can also press the “Sum” button to display the SL as a monetary amount.
- Since this is a non-leveraged buy location, you have the choice to make No SL to eliminate the stop loss item.
You can adjust the stop loss at any time while trading is active. Take these steps to do so:
- Click on the related exchange in your portfolio to activate the “Edit Trade” window.
- Press “STOP LOSS”. If there is presently no stop loss and you want to add one, select Set SL.
- Change the stop loss parameters.
- To save the shift, press “Update”.
Please remember that after the exchange is opened, it is possible to increase your stop loss beyond the maximum stop loss permitted when the exchange is opened. It means debiting the funds from the balance you have accessible.
Utilizing stop losses reduces the chance of blowing your account and working to secure your trading resources. Stop-Loss brings numerous advantages; however, the potential downside could occur if short-term volatility in the price of traded assets may affect the termination of a position and result in a sale that may not be required if you are searching for a longer-term investment. So to make successful use of stop-loss, you must have the ability to discern where to stop-loss in your potential trades, and you should have a clear knowledge of the characteristics of tactics that are open to you as well.