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Put simply and technically, yes. They stop your losses at the level you set.
But that’s not a useful answer for a forex trader. Stop losses are a tool, and what we want to know is if and how we can use that tool to our advantage.
There is a reason that virtually every successful FX trader will recommend using stop losses: they help.
How effective stop losses are will depend on how you use them. There are some strategies that rely on stop losses to work. Others, though, use a stop loss sort of like the airbag in a car. You hope you never have to use it, but it’ll save you if you ever do need it to!
The Problem with Stop Losses
Sometimes, forex traders can get frustrated with stop losses. They can get so frustrated, in fact, that they blame stop losses for their losses.
Part of this is psychological. As long as the trade is open, even if it’s way into the red, it might, just might, bounce back. Some ...
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