How Is a Stop-Loss Order Different in Forex?
A casual browsing of currency brokers’ platforms reveals an inescapable message. Forex is different from other markets such as stocks and commodities in many ways. The list of what distinguishes the currencies is extensive. However, what you will not find included in the list is the function of stop loss orders. At first glance, it does not seem that this area needs exploring. What of an order that attempts to limit a loss or prevent a profit from turning into a loss? Its function is known. End of story; Not so fast. When a stock trader executes a buy order, he deposits at least 50% of his purchase. If a Forex trader also deposits 50% of his purchase, there would be no need to distinguish between their stop-loss orders. But in most cases, the Forex trader is more leveraged (at times close to 100-to-1); so a certain adjustment needs to be made in placing a Forex stop-loss to accommodate for the extra exposure. There is also a difference in the technicals. In stocks, participants tend to
