Forex glossary
Stop loss
Documentation context: For standard OTC FX in MT5, long exits check Bid and short exits check Ask; exchange instruments and execution modes can use different rules.
An instruction to close a position when a specified level is reached. An ordinary stop does not guarantee a fill at that price; triggering rules depend on the instrument and provider.
Illustrative example
How does it work in practice?
In a hypothetical long position, entry is 10 USD per unit and the stop is 9 USD. A gap produces an actual exit at 8.80 USD; price loss is 1.20 USD per unit before fees.
A reward ratio does not create an edge on its own
Stop loss versus take profit
Linear long-position model: 100 units, entry 10 USD per unit, SL 9 USD and TP 12 USD. The figures below exclude costs.
On a narrow screen, the table can be scrolled horizontally.
| Term | What it describes | Shared example |
|---|---|---|
| Stop loss | An adverse-move exit condition; an ordinary stop does not guarantee the loss amount. | Planned −100 USD at 9 USD; an actual 8.80 USD fill gives −120 USD. |
| Take profit (TP) | A favorable-move exit condition; triggering is separate from execution. | Actual closure at 12 USD gives +200 USD of price P/L. |
Takeaway: Order levels describe a plan. Settlement follows confirmed fills, position quantity and assigned costs.
Change an assumption, see the result
What changes if…?
Enter planned loss, profit and trade cost. Observe how costs change the net loss and break-even rate. An ordinary stop does not guarantee execution matching the plan.
Convention: risk:reward = 1:2 means reward/risk = 2. The model has two fixed outcomes and an identical full-trade cost. It does not predict a win rate. A stop does not guarantee the loss assumed in the plan.
Check your understanding
Use the actual stop fill and distinguish the full loss from deterioration against the plan.
Show the answer and explanation
−120 USD
(8.80 − 10) × 100 = −120 USD. Use the actual fill for settlement, not the planned stop level.
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Related terms
Sources and documentation
- MetaTrader 5: basic trading principles
Orders, deals and positions; FOK, IOC and partial-filling policies.
Document read:
The example illustrates the mechanism. Check current account conditions and instrument specifications with the provider.