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What is Stop Loss and Take Profit in trading?

February 2, 2022

When you trade, you are not always on standby to maintain your position. There will be times when you are away for another reason. With this said, the VT Markets platform provides facilities to order a certain target or limit-to-limit losses. It also closes your position automatically when it reaches your profit target.

On the platform, there are two facilities: Stop Loss and Take Profit, commonly referred to as SL and TP.

Stop Loss is an order to close a position automatically when it reaches a price. It is usually used to limit losses.

Stop Loss is placed in a losing position because the goal is to limit losses. So when you want to buy, you place an SL below the position entry price. When you sell, on the other hand, you put an SL above the entry price.

Take Profit is an order to close a position automatically when it reaches the desired price. It is set in a profit position because the goal is to determine your trading profit target.

So, when you want to buy, you put TP above the position entry price, and when you sell, you put TP below the entry price.

How to use Take Profit

Take Profit can be set at the beginning when you enter a position and modified when the position is already running. When creating TP, you must put it in a profit position below or above the entry position. Meanwhile, when the position price is already running, you can modify it (or create a new one if you haven’t yet) by determining TP below or above the current running price.

How to use Stop Loss

Stop Loss can be set at the beginning when you enter a position and modified when the position is already running. When setting up an SL, you must put it in a loss position below or above the entry position. When the price of the position is already running, you can modify it (or create a new one if you haven’t done yet) by setting an SL below or above the current price.

When using Stop Loss, you can use several common ways:

Set standard Stop Loss to limit losses – The most standard Stop Loss is to limit losses, hence the term. The way to set it is when entering a position and then enter Stop Loss in the Stop Loss section of the VT Markets trading platform. If you are not on standby and the price hits the Stop Loss, your position will be closed automatically.

Set Stop Loss profit to maintain profit – The second way to use Stop Loss is with Stop Loss profit. This is a trick to keep profits running. For example, when you place a position, which goes well in the end, you will reap benefits. The moment you get the floating profit results, you can modify the initial Stop Loss and change it to the entry price or a better price. When the market reverses direction, the Stop Loss will get hit; however, it will still record positive results (unless there is a price gap).