Trading mechanics
Stop loss
A resting order that closes a losing position at a predetermined level. It is the mechanism that turns a risk-per-trade figure into an actual limit rather than an intention.
GFN’s figure
Stop-loss requirements on a GFN account depend on the programme and options attached to it. Where a stop is compulsory it must be placed on the platform - a mental stop does not satisfy the rule, and a missing compulsory stop can trigger position closure.
- Requirement
- Depends on the account's programme and options
- Mental stops
- Do not count where a platform stop is required
- Missing compulsory stop
- Can trigger closure or corrective action
In detail
Stop loss,explained
A stop placed at a level that suits the strategy and a position sized to make the resulting loss acceptable are the same decision made in two steps. Placing the stop where the loss is comfortable instead is how strategies get stopped out of trades that would have worked.
A mental stop is not a stop. Where an account requires a platform stop it has to be on the order; a stop held in your head is unavailable during a disconnection, which is exactly when it is needed.
Related
Terms thatcome with it
Most rules only make sense next to the ones they interact with. These are the entries this one depends on.
Stop order
An order that becomes a market order once a specified price is touched. Used to enter on a breakout or to exit a losing position, it fills at whatever price is available once triggered.
Take profit
A resting order that closes a position at a target price. Paired with a stop loss it fixes the reward-to-risk ratio of a trade at the moment it is placed, before the outcome is known.
Position size
How many lots a trade is placed in. It is calculated from the dollar amount being risked and the stop distance, not chosen first - which is the reverse of how most traders approach it.
Trailing stop
A stop loss that follows the price at a fixed distance as a position moves into profit, and stays put when it moves back. It locks in gains without capping the trade at a target.
Soft breach
A rule violation that triggers corrective action - a position closed, a warning, a review - without failing the account outright. The account survives, but the trade or the profit attached to it may not.
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