How to Set up Stop Loss & Take Profit in MT4

One of the keys to achieving success in financial markets over the long term is risk management. However the financial market is continuously volatile, and no one can predict its movement in advance. That’s why stop losses and take profits should be an integral part of your trading strategy, which helps limit your risk and maximize your trading potential, respectively.

So now let’s have a look at how to set up Stop Loss & Take Profit on the MT4 platform.

How to Set up Stop loss, Take profit in the Order Window

The first and most straightforward way to add Stop Loss or Take Profit to your trade is to do it when placing a new order.

In the ‘Order‘ window, after entering some parameters such as symbol and trading volume, you can set Stop Loss or Take Profit by clicking on the arrows in the SL and TP fields and adjusting it from there; or filling in the price values as your preference.

Note: If your Stop Loss or Take Profit is set too close to the current price, the notification “Invalid S/L or T/P” will be shown.

How to Set Stop loss, Take profit for Open Trades

If you want to add or modify Stop loss and Take profit for existing trades, follow the guide right below:

1. From the ‘Terminal’ window, you can view all of your open trades under the ‘Trade‘ tab.
2. A menu with different options will appear, right-click on the trade, and select ‘Modify or Delete‘.
3. In the Stop Loss and Take Profit fields, enter the values (in points) you want to place.
4. Click ‘Modify‘ to submit the changes when you are ready. The new SL and TP levels will be updated in the Terminal.

For a more quickly modification of Take profit and Stop loss orders, from the chart of the instrument, please drag SL and TP lines with the mouse to your target prices.

What are the minimum levels of Stop loss and Take profit for the instrument

To know the minimal difference between the current price and the SL or TP levels for an instrument, right click on the instrument from the ‘Market Watch’ window, then select ‘Specification‘. It will opened up a new window. And you can view a number in the ‘Stops level‘. This number shows the minimum level your SL and TP need to be set (in pips).

For example, if the ‘Stops level’ is 30 and the current price level is 1.32150. Then you want to open a long position, you have to place a SL order of at least 1.32120 and a TP of at least 1.32180.

The 3 most basic principles when setting Stop loss & Take profit

When starting to trade, traders always wonder how to effectively set Stop loss, how to balance between Stop Loss and Take profit. The 3 most basic rules when placing Stop Loss and Take profit orders include:

Take Profit must be at least equal to Stop Loss – This is very important because you should not risk more than your profit.

The most popular Risk:Reward ratio accepted by investors is 1:1. That is, if you set Stop Loss at 10 pips then Take Profit is at least 20 pips. In fact many traders, however, put 1:1 ratio for less profit but more security.

Set Stop Loss and Take Profit on the same timeframe – You can analyse the market trend on different time frames, but the decisions on entry, exit, Stop Loss, Take Profit should all be consistent on 1 time frame.

Take gaps into your consideration while setting their S/L and T/P – Traders should understand the features of each market they trade. Some certain markets have day-to-day gap (stocks, for instance). Traders should take it into their consideration while they set their S/L and T/P as if a market gaps above or under their target price, the S/L or T/P will be filled at the next available price. If the price opens below the trader’s S/L price, this can result in more extreme losses.

Jesse Livermore, a legendary trader, said: “Markets are never wrong, but opinions often are”. The market is never wrong, only our judgment is often wrong. Even if you are a good and experienced trader, The first and most critical step is to keep a close eye on your trades and manage their positions by using Stop Loss and Take Profit. While Stop loss is a tool to minimize your loss when the price doesn’t move in the direction you want, Take profit is used to close a trade automatically at a specific rate that you are happy to close an order for a profit. Also, Limit and Stop orders are another helpful technique to manage trading risk.

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