Exiting trades is where the real trade craft lies. Knowing when and how to exit a trade sets apart the successful from the losers. SL and TP orders are two must-have and largely misunderstood instruments for managing trades in the currency market.

A perfectly applied SL/TP system works by protecting capital, ensuring gains, and eliminating emotional hypotheticals that could jeopardise even the most well-thought-out strategy. Placing Stop-Loss and Take-Profit orders is a learned skill not only for limiting downside but also for cementing a disciplined, reliable process to make profits consistently.

What Are Stop Loss and Take Profit Orders?

Stop loss (SL):
A pre-set price level at which the broker will close your trade automatically against you in the market. Think of it like taking out an insurance policy to prevent a small error from turning into a large financial disaster while trading forex. 

Example: If you buy a currency pair like EUR/USD at 1.1000 and put a stop loss at 1.0950, then as soon as the price drops by 50 pips, the trade will be closed and will consequently protect you from more downside. 

Take Profit (TP):
An order placed at a predetermined price level triggers a closure applying to that trade once the price reaches the predefined profit. This gives you peace of mind in capturing gains without emotional uncertainties due to fast-moving markets. 

Example: Setting a TP at 1.1100 will secure your profit as soon as your trade closes, 100 pips in your favour.

Importance of SL and TP in Forex Trade

1. Protect your capital: The forte of survival in forex is capital preservation more than hunting for a big win. Even the best of them, trading professionals, lose trades, but with the right SL level, losses can be kept within limits to avoid losing money. 
2. Help to keep emotional discipline: Emotions are a trader’s worst enemy, especially for beginners starting trading. Fear causes a trader to exit too early, while greed beckons at illegitimate profits for others to hold on. SL and TP are there to automate decision-making, averting panic or overconfidence. 
3. Helps in putting up a reproducible trading system: Without a defined exit, the performance of the particular strategy cannot be ascertained. A consistent level of SL and TP will allow the results to be measured, the strategy adjusted, and the system refined thereafter.

Strategic Application of Stop Loss 

1. Make SL based on market structure: Don’t place SL levels at random locations or too close to your entry in your trading plan. Use technical analysis to identify logical points such as recent swing highs or lows, major support and resistance, or trend line breaks where your trade idea becomes invalid.
2. Taking into account volatility: High-volatility markets (such as news-released markets) need wider SL to avoid being early stopped out of trades. You may use the Average True Range (ATR) indicator to arrive at the normal market movement as the basis for your improved stop loss.
3. The Percent at risk rule: If 1-2% of your capital is used in any trade, you can survive no-win streaks without blowing your account. For example, in a $10,000 trading account, a 2% risk rule would risk only $200 at a time with a lot size adjusted to the distance from the stop loss.

Strategic Take Profit

1. Target a Strong Ratio of Risk to Reward: This generally involves both the above ratios: 2:1 or 3:1, meaning you target two times or three times larger than your risk. So whether you win less than half the time, you’d still be profitable. 
2. Apply Technical Targets: You can put a TP on price action zones like resistance levels, pivot points, and Fibonacci retracement levels. That way, your profit targets are more achievable as supported by the market structure. 
3. Think Scaling-Out: Instead of closing your position entirely at one selected TP level, you may want to realise partial profits and move your SL to break even on its remaining part. It locks profits and still keeps portions open for further gains in your trading account.

Common Mistakes to Avoid

• Placing an SL much too close to the entry level often results in a stop-out.
• With no SL set and leaving it up to ‘fate’ to decide the market move.
• Placing a TP over the horizon in unreasonable terms of price movement.
• Adjusting the SL further to the losing side of the trade.
• Standing before closing a trade out of fear before reaching a TP.

Stop losses and take profits do not just help; they make up the very foundation of successful trading strategies. If used correctly, these two players in the foreign exchange market:

1. a) Will help you manage risk;
2. b) Will take out the emotional aspect from your decision-making;
3. c) Will create a disciplined, repeatable trading approach;

In Forex, the market will do whatever it wants, but one good thing about trading Forex is that you can dictate how much you are willing to lose and how to lock in profits. Always decide on your exit before you enter any trade; this will make you much more confident and consistent in your trading.

Benefits of Using Cheap Forex VPS to Ensure the Effectiveness of Stop Loss and Take Profit Orders

When contrasted with slow-moving Forex markets, speed of execution nurtures that fine line between achieving one’s targeted take profit and witnessing a reversal while waiting for the order to be executed. This is the gap that is being eased by us here at Cheap Forex VPS.

Having your trading platform on a low-latency VPS assures the automatic execution of your stop loss and take profit orders without depending on a normal connection or “on-and-off computer syndrome.” This independence is the ultimate requirement if one is a trader who relies upon precision, which few can afford to lose on high volatility days, even without slippage.

At Cheap Forex VPS, we keep your trading platform running 24/7. Moreover, your SL and TP orders never fall asleep and are just on time the moment the target level is breached by the price movements in the foreign exchange market. And that means no more delays or missed opportunities – just neat, foolproof trade management as you planned in your trading plan. 

Ready to shield your trades and improve their execution? Begin trading with your Forex trading platform on Cheap Forex VPS right away and get maximum results with every stop-loss and take-profit account recharge.