In MetaTrader 4 (MT4), Stop Loss in scalping and Trailing Stop Loss in scalping are two different risk management mechanisms that help protect an investor’s capital. Here are their key differences:
🛑 Stop Loss (SL)
Definition: An order that automatically closes a position when the price reaches a specified loss level.
Static: Once set, it does not change unless the user manually edits it.
Purpose: Protects against greater losses if the market moves in an unfavourable direction.
Example: You buy EUR/GBP at 1.1000 and set your SL at 1.0950. If the price falls to 1.0950, your position will be closed.
🔄 Trailing Stop Loss (TSL)
Definition: A dynamic order that ‘follows’ the price as it moves in a favourable direction.
Automatic update: If the price rises (for a buy position), the TSL moves up according to a set interval (e.g. 15 pips).
Purpose: Secures profit and limits loss while allowing the position to ‘breathe’.
Example: You buy EUR/USD at 1.1000 and set the TSL to 15 pips. When the price rises to 1.1020, the TSL moves to 1.1005. If the price starts to fall, the position will be closed when it reaches this level.
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Key properties of Stop Loss and Trailing Stop Loss:
| Feature | Stop Loss | Trailing Stop Loss |
|---|---|---|
| 🔒 Purpose | Limits losses by selling at a fixed price | Locks in profits while limiting losses |
| 🎯 Trigger Level | Fixed price level | Dynamic price level that moves with market |
| 📈 Market Movement Reaction | Does not adjust with price movement | Adjusts upward with favorable price movement |
| 📉 Downward Protection | Yes | Yes |
| 💰 Profit Lock-In | No | Yes |
| ⚙️ Setup Complexity | Simple | Slightly more complex |
| 🔄 Adjustment Mechanism | Static | Automatically adjusts with price increases |
| 📊 Best Use Case | When you want to cap losses at a known level | When you want to protect gains and limit losses |
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