Stop loss Trading Strategy is one of the most common strategies used by the binary option traders. The stop loss trading strategy is considered to be simple at the first glance however in practice it needs expertise and experience to choose the right stop loss time. To select the stop loss strategy is a bit difficult since it depends on many factors which are mentioned below:
• Risk tolerance: The risk bearing capacity of a trader influences the stop loss strategy of the traders. Because there are different temperamental traders in the market, this strategy truly depends on the personal preferences of a trader.
• Trading vehicle: It truly depends on which market tool you are working on as each has its own stop loss strategy. A stock trader search for a constant stop loss level while an options trader might choose a two dimensional stop loss strategy.
• Trading style: This strategy differs for each trader because the trading style of each trader is different from the other. A trader might be making 5 trades during the day while the other making just one. Therefore it truly depends on the trading style, since the former would be looking for a tight stop loss strategy whereas the latter would want a less strict and flexible stop loss strategy.
• Behavior of the stock market: The behavior of the stock market has a big impact on the strategy employed by a trader. Calm markets would mean tighter strategies and the flexible strategies during unstable trade periods.
For these reasons, stop loss strategies are complicated strategies.In these strategies each trader determines his own limit and develops his own system according to his experience.