MetaTrader 5 (MT5) is one of the most popular trading platforms among forex and CFD traders. Risk management is critical for all traders. One of the most effective ways to manage risk is by using Stop-Loss (SL) and Take-Profit (TP) orders. These tools help traders minimize losses and secure profits automatically.
This article will cover all you need to know about MT5 Stop-Loss and Take-Profit order setup and use. It will provide you with step-by-step guidance and share best practices for you to be a better trader.
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What Are Stop-Loss and Take-Profit Orders?
Stop-Loss (SL) Order
It is used to restrict possible losses by closing a trade automatically when the price touches a certain level. This is helpful in unstable markets where prices fluctuate quickly. If you purchase EUR/USD at 1.1000 and place a Stop-Loss at 1.0950. If the price falls to 1.0950, your trade will be closed automatically without further losses.
Advantages of Applying Stop-Loss Orders
- Avoids excessive losses
- Keeps you disciplined in your trading approach
- Manages risk without continuous monitoring
- Functions even when you are offline
Take-Profit Order
It is a type of order that locks profit when the price is at a certain level. It ensures the trader can get out of trades at his wanted profit automatically. For instance, if you’re buying EUR/USD at 1.1000 and having a Take-Profit of 1.1100, your trade will close automatically at a price of 1.1100 so you can lock your profit.
Advantages of Employing Take-Profit Orders
- Automatically locks in profit
- Avoids emotional trading choice
- Enables traders to move away from the screen
- Aids to implement an evident trading strategy
How to Set Up Stop-Loss and Take-Profit Orders in MT5
Setting Stop-Loss and Take-Profit When Opening a Trade
Set Up Stop-Loss and Take-Profit Orders in MT5
Open MetaTrader 5 and Log In
- Ensure you are logged into your MT5 trading account.
- If you are using FundingPips, make sure your trading account is set up correctly.
Open a New Trade
- Click on “New Order” from the top toolbar or press F9 on your keyboard.
- A new order window will appear.
Select Your Trading Asset
- Choose the instrument (e.g., EUR/USD, GBP/USD, Gold) from the Market Watch window.
Enter Your Stop-Loss and Take-Profit Levels
- In the order window, find the Stop-Loss and Take-Profit fields.
- Manually input your preferred price levels according to your trading plan.
Execute the Trade
- Choose Market Execution or Pending Order as your order type.
- Click “Buy” or “Sell” to execute the trade.
After the trade is executed, the system will watch the market and close your trade when the price hits your Stop-Loss or Take-Profit level.
Modifying Stop-Loss and Take-Profit on an Open Trade
Traders need to adjust SL and TP levels based on market conditions.
Open the Trade Tab
- Press Ctrl + T to open the Terminal window.
- Click on the Trade tab to view your active trades.
Locate the Trade to Modify
- Find the trade for which you want to adjust the SL or TP levels.
Modify the Order
- Right-click on the trade and select “Modify or Delete Order”.
- A modification window will open.
Adjust Stop-Loss and Take-Profit
- Enter your new Stop-Loss and Take-Profit levels.
Confirm Changes
- Click “Modify” to save the new levels.
This feature is particularly useful when market conditions change, and you need to adapt your risk management strategy accordingly.
Setting Stop-Loss and Take-Profit for Pending Orders
Pending orders allow traders to predefine entry points along with SL and TP levels before the market reaches them.
Open the New Order Window
- Click “New Order” or press F9.
Select Pending Order Type
- Choose “Pending Order” from the order type menu.
Set Entry Price, Stop-Loss, and Take-Profit
- Define the price at which you want the order to be triggered.
- Set your SL and TP levels accordingly.
Confirm and Place the Order
- Click “Place” to finalize the order.
Once the market reaches your entry price, the trade will be executed with the pre-set SL and TP levels.
Best Practices for Using Stop-Loss and Take-Profit in MT5
Follow a Risk-Reward Ratio
- A popular strategy is the 1:2 risk-reward ratio (risking 50 pips to gain 100 pips).
Consider Market Volatility
- Avoid setting SL too close, as normal price fluctuations might trigger it prematurely.
Use a Trailing Stop-Loss
- A trailing stop moves your SL level as the price moves in your favor, locking in profits.
Monitor Support and Resistance Levels
- Set your SL below support levels in a buy trade and above resistance in a sell trade.
Avoid Emotional Adjustments
- Stick to your trading plan and avoid changing SL and TP due to emotions.
Conclusion
Stop-Loss and Take-Profit orders in MT5 facilitate risk management and amplify profits. Implementing these tools effectively helps protect capital. They can also limit losses and secure gains automatically.
If you are looking for a best prop firm, FundingPips offers the MetaTrader 5 platform. It offers excellent trading conditions. Whether you are a beginner or an expert, understanding how to use SL and TP levels correctly will make you a more successful trader.
