Two common beneficial technical analysis tools available in forex trading terminologies are the “Take Profit” and “Stop-Loss.” These enable traders to define when to stop an order, maximise profits or reduce the risk of major losses.

Stop loss and take profit are marvelous tools to help with risk management strategies and, consequently, your financial returns.

A stop-loss order is placed with a broker to buy or sell a security when it reaches a specific price. Stop-loss orders are composed to limit an investor’s loss on a position in a security.

Stop loss is the place to avoid the lowest minimum loss on the trade, while Take profit is placed to gain the maximum profit on the trade.

For example, if you gain on a trade, the currency-pair price reaches take profit, and when you lose on a trade, it means the price of currency-pair reaches stop loss as per the buy and sell of currency and vice-versa.

Stop-loss acts as an order which helps traders to limit losses in an open position if the underlying assets reverse their moving direction opposite of the expectation of the trader.

In this case, the trade can cause losses; we can put stop-loss order to limit those losses. Stop loss is very important to place because you can avoid a big loss on your trade.