eToro's Stop Loss feature is an essential tool that every trader should be familiar with. It is a tool that helps traders minimize their losses when the market is moving against them. In this guide, we will take a closer look at this risk management feature, how it works, and how to use it to your advantage.
|⚙️ Options||Amount, Rate|
|📉 Minimum||1 pip away from current market price||📈 Maximum||50% of position amount (except non-leveraged Buy positions)|
|❌ Close Automatically||Yes|
To use the Stop Loss feature, you need to have an eToro account first. Get started here.
77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
What is eToro's Stop Loss Feature?
Stop Loss is a risk management tool that allows traders to set a predetermined price level at which they will exit a trade to limit their losses. It is an automatic order that will close your trade when the market reaches a certain price level. The Stop Loss feature is available on eToro's platform for all tradable assets, including stocks, currencies, and cryptocurrencies.
How Does eToro's Stop Loss Feature Work?
When you open a trade on eToro, you will have the option to set a Stop Loss order. To do this, you need to enter the price level at which you want the trade to be closed automatically.
For example, if you buy a stock at $100, you can set a Stop Loss order at $95. If the price of the stock drops to $95, your trade will be closed automatically, limiting your losses to $5 per share.
It is important to note that the Stop Loss order will only be executed if the market reaches the price level you set. If the price of the asset never reaches your Stop Loss level, the trade will remain open until you close it manually.
Types of Stop Loss Orders on eToro
eToro offers three types of Stop Loss orders: Basic, Guaranteed, and Trailing Stop
- Basic Stop Loss: The Basic Stop Loss order is the most commonly used type of Stop Loss order. It is a non-guaranteed order that will be executed when the market reaches the price level you set. If the market gaps down or there is a delay in execution, your trade may be closed at a different price level.
- Guaranteed Stop Loss: The Guaranteed Stop Loss order is a guaranteed order that will be executed at the price level you set, regardless of market volatility or gaps. However, the Guaranteed Stop Loss order comes with an additional fee, which varies depending on the asset you are trading.
- Trailing Stop: The Trailing Stop is a dynamic Stop Loss order that moves with the price of the asset. For example, if you set a Trailing Stop at $95 with a distance of $5, the Stop Loss level will move up with the price of the asset. If the price reaches $110, the Stop Loss level will move up to $105. If the price then drops to $105, your trade will be closed automatically.
How to Set a Stop Loss Order on Etoro?
Setting a Stop Loss order on eToro is a straightforward process. Here are the steps you need to follow:
- Log in to your eToro account and select the asset you want to trade.
- Click on the "Trade" button.
- In the trading window, select "Order" and then "Stop Loss."
- Enter the price level at which you want the trade to be closed.
- Choose the type of Stop Loss order you want to use (Basic, Guaranteed, or Trailing Stop).
- Check your order and click "Submit."
- Once your order is executed, you can monitor it in the "Portfolio" tab.
Difference with Take Profit
Stop Loss and Take Profit are two crucial tools that traders use to manage their trades on eToro.
As mentioned earlier and to reiterate, stop Loss is like an emergency exit that you can set to minimize the losses. It automatically closes the trade when the asset's price reaches a specific level that you set. Basically, it's used to protect you from losing too much money in case the market goes against your trade.
Take Profit, on the other hand, is like a goal that you set to lock in the profits. In this case, it automatically closes the trade when the asset's price reaches a specific level that has been set. This ensures that you won't miss out on the possible profits if the market turns into your favor.
We can't emphasize enough...
Using Stop Loss and Take Profit together can you manage your risk and create a trading plan that fits your style and preferences. However, it's important to remember that these tools DO NOT guarantee that your desired price level will be executed.
Keep in mind: They only trigger the order to be executed if the asset's price reaches the specified level. So, it's essential to set realistic Stop Loss and Take Profit levels based on the asset's volatility and your risk tolerance.
Tips for Using eToro's Stop Loss Feature
- Always use Stop Loss orders: Stop Loss orders are essential risk management tools that can help you limit your losses. It is always a good idea to set a Stop Loss order when opening a trade.
- Set the Stop Loss level based on your risk tolerance: The Stop Loss level you set should be based on your risk tolerance. If you are a conservative trader, you may want to set your Stop Loss level closer to your entry price. If you are a more aggressive trader, you may set your Stop Loss level further away from your entry price.
- Consider the asset's volatility: The volatility of the asset you are trading can affect the Stop Loss level you set. If an asset is highly volatile, you may want to set a wider Stop Loss level to account for price swings. If an asset is less volatile, you may set a tighter Stop Loss level.
- Monitor your trades: Stop Loss orders are not a set-it-and-forget-it solution. You should regularly monitor your trades to ensure that they are performing as expected. If necessary, you can adjust your Stop Loss level to better align with the market conditions.
- Use Guaranteed Stop Loss orders for high-risk trades: If you are trading a highly volatile asset or during a high-risk event, consider using a Guaranteed Stop Loss order to ensure that your trade will be closed at the price level you set, regardless of market conditions.
The Bottom Line
eToro's Stop Loss feature is an essential tool for every trader. It allows you to limit your losses and manage your risk effectively. By setting Stop Loss orders, you can trade with confidence and reduce the impact of market fluctuations on your portfolio.
And with eToro's user-friendly platform and range of Stop Loss order options, you won't have a hard time implementing this risk management strategy into your trading plan.
Before you can use this feature, you need to have an eToro account, so open one now!
eToro is a multi-asset platform which offers both investing in stocks and cryptoassets, as well as trading CFDs.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Past performance is not an indication of future results. Trading history presented is less than 5 complete years and may not suffice as basis for investment decision.
Copy Trading does not amount to investment advice. The value of your investments may go up or down. Your capital is at risk.
Cryptoasset investing is highly volatile and unregulated in some EU countries. No consumer protection. Tax on profits may apply.
eToro USA LLC does not offer CFDs and makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared by our partner utilizing publicly available non-entity specific information about eToro.