STOP LOSS, TAKE PROFIT & TRAILING STOP
Basically, a stop loss is exactly what it says and that is stop taking a loss on any given trade if it is not going the way you anticipated when you entered the trade. S/L eliminates the emotional roller-coaster of what to do right when you are in trade that isn’t performing as you planned i.e. hoping, wishing or praying the trade will come back to profit or averaging the trade and making the situation worse.
So, conversely a take profit is the opposite of a stop loss in that it is a target price where you planned to take profits. Of course, it goes without saying that you should always run your winners so it is important to assess at that point whether further upside is limited or is the market continuing in your favour. In doing this a trader should never let a winning trade turn into a loser that is poor risk management. In cases where the market is in your favour but you feel that there is more upside to the market move then you can consider using a trailing stop.
A trailing stop is where you can set a pre-determined price away from the current traded price where you will exit the trade but still take profit if the direction of the market changes. Trailing stop works by setting a fixed exit price where you will take profit if the market direction changes by the amount of ticks you set. Simply, it is a stop loss but one that moves in the direction of the market and is useful in running profits and preventing turning those into losers.
Most traders will use technical analysis to set S/L & T/P levels simply because they are easy to plot on a chart using information about that financial instrument i.e. trend line break, support and resistance levels. Fundamental data is more complex to use for placing S/L & T/P but again it can be used if you are smart enough to research past releases with their relative effect on prices. Look for instances where the market missed expectation and or exceeded expectations, relate and plot the move on a technical analysis chart and work out how this influenced the market as a barometer for potential future data releases. Therefore, we always strongly advise that you write down what influence an economic data release did and keep records for the future.