Stop-loss (stop-loss) and take-profit levels (take-profit) help automate the trading process by establishing predetermined exit points. This ensures traders stick to their strategy and avoid emotional decisions. By setting stop-loss, traders limit potential losses, while take-profit ensures they lock in gains when the market reaches its desired target.
Let's discuss how traders can set stop-loss and take-profit levels on MT5.
This is an example only to enhance a consumer's understanding of the strategy being described above and is not to be taken as Blueberry Markets providing personal advice.
Stepwise guide to set up stop-loss and take-profit orders
For a new trade
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Log into the MT5 platform
The trader begins by launching MetaTrader 5 (MT5) on their computer or mobile device. They must enter their trading account credentials to access the platform. -
Access the desired instrument's chart
The trader navigates to the Market Watch window and searches for the desired financial instrument. Once found, they open its chart for analysis. -
Right-click to open the context menu
On the chart, the trader can right-click anywhere to open the context menu. This menu provides options for trading, chart customization, and technical analysis tools.
- Select 'trading' from the menu
The trader selects the 'Trading' option from the context menu. This reveals additional trading-related actions.
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Choose 'new order'
The trader selects 'New Order' from the submenu to open the order window. Here, trade details are entered.
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Enter trade details
The trader specifies the trade volume (number of lots) and selects the order type based on their trading strategy.
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Specify stop-loss level
In the order window, the trader enters the desired stop-loss level to automatically close the trade if the market moves against them.
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Activate the trailing stop option
The trader checks the 'Trailing Stop' box below the stop-loss field to activate the trailing stop feature.
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Set trailing stop distance
The trader defines the trailing stop distance in pips, indicating how far the stop-loss should trail the market price.
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Confirm settings
To ensure accuracy, the trader reviews all the trade details, including stop-loss and trailing stop settings.
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Execute trade
Once satisfied, the trader clicks 'Buy' or 'Sell' to place the trade, and the stop-loss and trailing stop settings are applied.
For an existing trade
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Double-click on a trade in the trade window
The trader double-clicks on an open trade in the 'Trade' tab to open the modification window.
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Modify stop-loss and take-profit
In the modification window, the trader updates the stop-loss and take-profit levels to new desired values.
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Drag the stop-loss and take-profit levels
Alternatively, the trader can drag the stop-loss and take-profit levels directly on the chart for quick adjustments.
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Right-click and select 'Modify or Delete'
The trader right-clicks on the trade in the 'Trade' tab and selects ‘Modify or Delete’ to access the modification window.
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Enter new stop-loss and take-profit levels
The trader inputs the new stop-loss and take-profit levels in their respective fields in the modification window.
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Click ‘Modify’ to confirm
After entering the new levels, the trader clicks 'Modify' to apply the updated stop-loss and take-profit settings.
How to create a custom trailing stop-loss indicator on MT5?
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Open MetaEditor
The trader opens MetaEditor, the development environment for creating custom indicators in MT5.
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Navigate to File > New > Indicator
The trader selects 'New Indicator' from the File menu to start creating a custom trailing stop indicator.
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Define indicator properties
Based on their strategy, the trader sets the calculation methods and displays settings for the new trailing stop indicator.
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Implement trailing stop logic
The trader writes code to track market highs and lows, adjusting the stop distance according to predefined conditions.
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Include initialization code
The trader adds initialization code for variables and buffers that store trailing stop values.
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Draw trailing stop levels on the chart
The trader uses graphical objects to display trailing stop levels on the price chart.
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Compile the indicator
The trader compiles the custom indicator in MetaEditor to check for errors and generate a usable .ex5 file.
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Test the indicator
The trader tests the custom indicator on historical data to ensure it functions correctly.
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Deploy the indicator
The trader copies the compiled .ex5 file to the 'Indicators' folder in MT5.
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Apply the indicator to the chart
The trader drags and drops the custom trailing stop-loss indicator onto the price chart via the Navigator panel.
Common mistakes to avoid while setting custom stop-loss/take-profit orders
Failing to account for market volatility
Ignoring market conditions leads to poor stop levels. Volatility impacts price movements, affecting stop-loss effectiveness. Hence, traders must adapt stop levels accordingly, considering fluctuations in price to avoid premature exits or missed opportunities.
Over-tightening stop-loss or take-profit
Setting excessively tight stop-loss levels increases the risk of being stopped out prematurely. Tight take-profit targets limit profit potential, often leading to missed opportunities. Proper distance ensures trades have room to develop and reach gain targets.
Not adjusting stop-loss and take-profit after entering the trade
Failing to modify stop-loss or take-profit can leave a trade exposed to risk. As market conditions change, traders must adapt their levels. Regularly adjusting ensures better risk management and prevents losses due to unchanged parameters.
Placing stop-loss and take-profit too close to each other
Setting stop-loss and take-profit too close results in frequent stop-outs. This approach limits trade opportunities, as price movements may not reach the target before hitting the stop-loss. Proper distance between stop-loss and take-profit allows for proper trade development.
Set stop-loss and take-profit with confidence
By using trailing stop-losses in MT5, traders can adapt to market movements and reduce the risk of large losses. As the market price moves in their favor, the stop-loss moves with it. This approach helps traders manage their trades better, providing a disciplined strategy to navigate volatile forex markets.
Disclaimer: All material published on our website is intended for informational purposes only and should not be considered personal advice or recommendation. As margin FX/CFDs are highly leveraged products, your gains and losses are magnified, and you could lose substantially more than your initial deposit. Investing in margin FX/CFDs does not give you any entitlements or rights to the underlying assets (e.g. the right to receive dividend payments). CFDs carry a high risk of investment loss.