What they are
- Stop loss (SL): an order to close your position automatically if the price moves against you to a level you choose. It caps the loss on that trade under normal market conditions.
- Take profit (TP): an order to close the position automatically when the price reaches your target, locking in the gain.
- On a buy, the stop sits below the entry and the target above. On a sell, it is the other way round.
On the AlphaFX Pro platform you can attach SL and TP when you place an order, or add and move them on an open position as the trade develops.
How to choose where to put your stop
A stop should sit at the price that proves your trade idea wrong — not at an arbitrary number of dollars. Common approaches:
- Structure: just beyond a recent swing high or low, or the other side of a support or resistance level.
- Volatility: a multiple of the instrument's typical range (for example its Average True Range), so normal noise does not stop you out.
- Time: some traders also close trades that have not worked within a set period.
Place the stop first, then choose the position size so that the distance to the stop equals the amount you are willing to lose. Never widen a stop just to avoid taking a loss.
Setting a take profit and the risk/reward ratio
The risk/reward ratio compares the distance to your stop with the distance to your target. A trade risking 25 pips for a 50-pip target has a ratio of 1:2. With 1:2 you can be wrong more often than right and still come out ahead — but only if the target is realistic for that market.
| Order | Price | Distance | Result if hit |
|---|---|---|---|
| Stop loss | 1.0975 | 25 pips | −$50 |
| Take profit | 1.1050 | 50 pips | +$100 |
Slippage and gaps: when a stop does not fill at your price
A stop loss becomes a market order once its price is reached, and it is filled at the next available price. In fast markets — around major news, or when the market reopens after the weekend — the next available price can be worse than your stop level. This is slippage. If the price gaps straight past your stop, the fill will be at the first traded price after the gap.
- Avoid holding large positions through high-impact news if you cannot accept extra slippage.
- Be cautious about weekend exposure, especially on instruments that tend to gap.
- Size positions so that even a gap beyond your stop would not do serious damage to the account.
Common mistakes
- Trading without a stop because 'it will come back'.
- Stops so tight that normal price noise closes the trade.
- Moving the stop further away as the price approaches it.
- Targets far beyond anything the market has moved recently.
- Forgetting the spread: a buy position's stop is triggered by the bid price, so it can be hit slightly before the chart's mid price touches it.
Frequently asked questions
Does a stop loss guarantee my loss?
No. A standard stop loss is filled at the next available price, which can be worse than your level in fast markets or when prices gap.
Should I always use a stop loss?
Using a stop on every trade is one of the simplest ways to keep losses within a limit you chose in advance.
Can I change my stop loss after opening a trade?
Yes. On the AlphaFX Pro platform you can add or move SL and TP on an open position. Moving a stop to lock in profit is common; moving it further away to avoid a loss is not recommended.
What is a good risk/reward ratio?
Many traders aim for at least 1:1.5 or 1:2, but the target must be realistic for the market and timeframe you trade.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. This page is general information, not investment advice. Read the Risk Disclosure.