Hi, it’s Brian again Today I’m going to show you perhaps the most important thing you need to know about margin trading using MetaTrader 4 on any markets — cryptocurrency or forex or anything: How to protect your money using stop losses

Nobody wins even close to 100% of the time and mitigating your losses can be one of the most important skills in currency trading If you only watch one of my videos all the way through, please make it this one Stop losses will automatically close a trade for you if that trade goes too far in the negative Without adding a stop loss to your trade, you run the risk of it going the opposite direction you want until you hit your margin limit and lose a bunch of money With that being said, setting a stop loss too close to your entry point will make you unable to make much money as all markets naturally fluctuate and exiting a trade too early can make you lose a lot of money in the long run, as well

First, I’ll show you how to set and change stop loss values in MetaTrader 4, then I’ll go over some real-world examples so you get an idea of what kinds of values you should use for your stop losses The easiest way to set a stop loss is when you initially open a new order Click on “New Order” in MetaTrader 4 Here you’ll see the “Stop Loss” field If you’re buying (expecting the value of the currency pair to increase), you want to set the value of the stop loss below the current value of the currency pair

If you’re selling (expecting the value of the currency pair to decrease), you want to set the value of the stop loss above the current value of the currency pair With a stop loss set on an order, you’ll see two lines across the MetaTrader chart Here is an order I placed earlier on the BTCUSD currency pair I shorted the pair, so my stop loss is above the entry point My entry point is represented by the green line and my stop loss is represented by the red line

If the value of the currency pair rises to the red line, my order will be closed as soon as possible I will lose money on that trade, but not as much as if there wasn’t a stop loss there and the value continued to rise I can change the value of this stop loss at any time by simply clicking and dragging the red line The first time you do this, you’ll get a modal window that pops up and asks you to accept the terms of changing an order live You only have to do this once, then you’ll never see it again

Let’s look at a real world scenario where a stop loss would have been helpful on this chart You’ll see here that a sell order would have done very well along this dip in value Once it got to here, though, the value reversed and if you didn’t close your order at it’s peak, you would have lost a lot of your gains The stop loss would have still been somewhere up here, so it wouldn’t have helped much You could have manually moved the stop loss down over the course of these couple days, OR you could have used something called a “Trailing Stop”

If you right click on the green line (once again, the green line represents your entry point on the order), you have the option to set a trailing stop You set a certain number of pips, which you can see by selecting the crosshair and dragging anywhere on the chart You’ll see my stop loss here is about 40,000 pips and I actually having a moving stop set to the same value What this does is as the value of the currency pair changes, the stop loss automatically moves with it With a moving stop set to 40,000 pips, your stop loss will stay 40,000 behind the highest profit value your order has yet achieved

It will only move in the profit direction (in this case down since it’s a short sell) never in the other direction A trailing stop will only starting moving after you’ve gone the 40,000 pips after the entry point, so in this trade, the red line will only start moving once the value dips to about here and then it will jump to the entry point That means that no matter what, you’ve broke even on this trade In this example, you would have seen the stop loss automatically go down as the value dropped, then it would have stayed put here, then it would have kept going here, stayed put again, dropped one last time, and you would have been stopped out then at some point early in the rise here You can see on this example also why you would want to give your stop loss some room for normal fluctuation in the market

The overall direction of this chart is down, but there are areas where the value rose for a little bit, then fell again If your stop loss is too small, you would have been stopped out (your order would have been closed) here, and you would have missed out on all this future activity There is no one value everyone agrees on about what you should set your stop loss to, it just depends how that fits in in your overall trading strategy At the end of the day, even with the best trading strategy, there will be times when your stop loss is too small and you miss out on these big gains, and there will be times when your stop loss is too big and you lose a lot of the gains you already made In the future, we will be going over specific strategies, but they all fail sometimes and you need to be prepared psychologically to deal with that, shrug it off, and move on to the next trade

Two good books for dealing with the psychological aspects of trading are Trading in the Zone by Mark Douglas and What I Learned Losing a Million Dollars by Brendan Moynihan I highly recommend picking up both of those and giving them a good read Neither are very long and you could probably knock out both in a weekend I’ve put links to them in the description of this video One last note on stop losses: If you enter a stop loss on the New Order screen of MetaTrader, that value is attached to the order itself as held in the exchange (in this case btc-e

com or in forex trading the exchange would be forexcom or another similar exchange) Trailing stop values are managed by the MetaTrader 4 software itself What that means is that your trailing stop will only be updated if MetaTrader is open and up and running on your computer and connected to the internet If your battery dies or something like that, the latest value of the stop loss will be stored in the exchange and your trade will be exited if that value is reached, but your trailing stop will discontinue moving

I never place a trade without also setting a stop loss, and I recommend you do the same not only to protect your money but to protect your sanity This kind of trading can be fairly intense psychologically and I recommend playing around with stop losses on your demo account on a few trades to see what works for you As always, let me know in the comments if you have any questions or anything to add Have a great day