Price slippage can have a significant impact on the effectiveness of fixed Take Profit (TP) and Stop Loss (SL) orders. When price slippage occurs, the price at which the order is executed can be different from the expected price, which can result in the TP and SL levels being off target.
In the case of a large slippage, the TP level may be smaller than expected, reducing the potential profit of the trade. At the same time, the SL level may be larger than expected, increasing the potential loss of the trade. This can result in a trade being closed at a smaller profit or a larger loss than initially intended.
For example, a trader sets a fixed TP level of 100 pips and an SL level of 50 pips. If the trade experiences a slippage of 20 pips, the TP level will be 80 pips and the SL level will be 70 pips. This results in a smaller potential profit and a larger potential loss.
In conclusion, fixed TP and SL orders can be vulnerable to price slippage, which can result in larger SL levels and smaller TP levels. This highlights the importance of monitoring trades closely and adjusting TP and SL levels as needed, especially in fast-moving or volatile markets where slippage is more likely to occur.
By waiting to set TP and SL levels after the trade is executed, traders can take into account the current market conditions and adjust their levels as needed. This can help reduce the risk of price slippage, as the trader can adjust the levels to take into account any unexpected price movements. This can also increase the chances of a successful trade, as the trader has more control over the trade and can make adjustments as needed.
In conclusion, sending TP and SL orders after a trade is executed provides traders with greater flexibility and control over their trades, which can increase the chances of a successful trade and reduce the risk of price slippage.
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