Need help understand stop loss and take profit

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I've been reading about Stop Loss and Take Profits and at this point I'm a bit confused.

Here is my current understanding:

1. If I'm selling a stock, I pay the bid price.

    I need to set a stop loss amount that is lower than the bid price.

    I need to set a take profit amount that is higher than the bid price.

2. If I'm buying a stock, I pay the ask price.

    I need to set a stop loss amount that is higher than the ask price.

    I need to set a take profit amount that is lower than the ask price.


Thank you...

 
Ralph Freshour:

I've been reading about Stop Loss and Take Profits and at this point I'm a bit confused.

Here is my current understanding:

1. If I'm selling a stock, I pay the bid price.

    I need to set a stop loss amount that is lower than the bid price.

    I need to set a take profit amount that is higher than the bid price.

2. If I'm buying a stock, I pay the ask price.

    I need to set a stop loss amount that is higher than the ask price.

    I need to set a take profit amount that is lower than the ask price.


Thank you...

Welcome to mql5

If you are selling an asset you are paying the Bid price 

  • You need to set a stop loss above the Ask price 
  • You need to set a take profit below the Bid price 
  • The order will be closed with the Ask price

If you are buying an asset you are paying the Ask price

  • You need to set a stop loss below the Bid price
  • You need to set a take profit above the Ask price
  • The order will be closed with the Bid price

There is also the brokers allowed minimum distance of any stop from current price limitation . Some brokers dont have that ,some do.

 
Thank you...
 

I have implemented the SL and TP logic.

Below is my Buy code snippet. The logic still seems 'backwards' to me. I have added the actual values when I run my code as comments so you can see what they are.

I don't understand, when buying a stock, why there is a SL below the bid price? Shouldn't the SL be above the bid price? My thinking is that I don't want to buy a stock that changes in price and goes up. I want to put a 'cap' on how much I'm willing to buy it for.

The TP amount I don't get that logic for a buy at all? That only makes sense to me if I am selling. Where is the profit in a buy trade?

Thank you... 


	Print("bid:",NormalizeDouble(Latest_Price.bid,_Digits)," STP:",STP," _Point:",_Point," stop loss:",NormalizeDouble(Latest_Price.bid - (STP * _Point),_Digits)); // // bid:145.45 STP:30 _Point:0.01 sl:145.15
	Print("ask:",NormalizeDouble(Latest_Price.ask,_Digits)," TKP:",TKP," _Point:",_Point," take profit:",NormalizeDouble(Latest_Price.ask + (TKP * _Point),_Digits)); // // ask:145.46 TKP:100 _Point:0.01 tp:146.46
                ZeroMemory(mrequest);
                ZeroMemory(mresult); 
                      mrequest.action = TRADE_ACTION_DEAL;                                      // immediate order execution
                       mrequest.price = NormalizeDouble(Latest_Price.ask,_Digits);              // latest ask price
                          mrequest.sl = NormalizeDouble(Latest_Price.bid - (STP * _Point),_Digits); // Bid:145.45 Stop Loss 145.15
                          mrequest.tp = NormalizeDouble(Latest_Price.ask + (TKP * _Point),_Digits); // Ask:145.46 Take Profit 146.46
                      mrequest.symbol = _Symbol;                                                // currency pair
                      mrequest.volume = dLot;                                                   // number of lots to trade
                       mrequest.magic = EA_Magic;                                               // Order Magic Number
                        mrequest.type = ORDER_TYPE_BUY;                                         // Market Buy Order
                mrequest.type_filling = ORDER_FILLING_FOK;                                      // Order execution type
                   mrequest.deviation = 100;                                                    // max price deviation, specified in points
 

I see what you mean , you are probably confusing SL with limit and stop orders 

Lets assume there is a market of strawberries - this market has one price not an Ask + Bid 

The price for 1 strawberry is 100$ in the market and is known as the "price of strawberries".

You buy a strawberry at 100$ 

You set TakeProfit for your strawberry at 140$ - that means (for the market) that if "price of strawberries" reaches 140$ and above you want to sell it.[and will profit $40]

You set StopLoss for your strawberry at 90$ - that means (for the market) that if "price of strawberries" reaches 90$ and below you want to sell it.[and will lose $10]

The broker is the mediator ,the dude/lady who you tell "i want to sell my strawberry" and has a list of people who want to buy and sell ,matches transactions accordingly.

The example above was for an instant execution .

Lets assume you have not bought a strawberry yet and the "price of strawberries" is 100$

You tell the market ,i will buy one strawberry if the price goes to 120$ -> that is called a Buy Stop 

You tell the market ,i will buy one strawberry if the price goes to 80$ -> that is called a Buy Limit 

 

This may help : 


 

Regarding your Strawberry instant execution example (great example BTW, thank you).

So after I purchase a $100.00 strawberry, there is still an open order pending for the stop loss and take profit values? Those will stay open on the broker side for how long?

Thank you...

 
Ralph Freshour:

Regarding your Strawberry instant execution example (great example BTW, thank you).

So after I purchase a $100.00 strawberry, there is still an open order pending for the stop loss and take profit values? Those will stay open on the broker side for how long?

Thank you...

Until they are hit ,if they are placed .

Price gaps on openings will also affect them .

 

Thanks a lot. You're explanations on this topic were the best I've ever seen online. And I've googled this topic a lot...!!!

 
Ralph Freshour:

Thanks a lot. You're explanations on this topic were the best I've ever seen online. And I've googled this topic a lot...!!!

You are welcome 

 

Regarding the Buy Stop and Stop Limit:

In the struct MqlTradeRequest I don't see a .property for Buy Stop?

Also, if I am buying a stock using the Buy Stop and Stop Limit, then (I'm assuming) I don't need to fill in the Stop Loss and Take Profit properties? I can set them to 0.00?

Thank you... 

struct MqlTradeRequest
  {
   ENUM_TRADE_REQUEST_ACTIONS    action;           // Trade operation type
   ulong                         magic;            // Expert Advisor ID (magic number)
   ulong                         order;            // Order ticket
   string                        symbol;           // Trade symbol
   double                        volume;           // Requested volume for a deal in lots
   double                        price;            // Price
   double                        stoplimit;        // StopLimit level of the order
   double                        sl;               // Stop Loss level of the order
   double                        tp;               // Take Profit level of the order
   ulong                         deviation;        // Maximal possible deviation from the requested price
   ENUM_ORDER_TYPE               type;             // Order type
   ENUM_ORDER_TYPE_FILLING       type_filling;     // Order execution type
   ENUM_ORDER_TYPE_TIME          type_time;        // Order expiration type
   datetime                      expiration;       // Order expiration time (for the orders of ORDER_TIME_SPECIFIED type)
   string                        comment;          // Order comment
   ulong                         position;         // Position ticket
   ulong                         position_by;      // The ticket of an opposite position
  };
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