How to Use Stops & Limits after July 31, 2009

New Compliance Rule 2-43(b) becomes active on 31 July 2009. Traders with US-based forex brokers will be able to use entry orders to place stops and limits. Entry orders help to minimize the losses and provide the ability to profit.

 In order to use entry orders for stop-loss and limits:

For Buy Positions

Placing an entry order to sell below the price where you got into the position protects you from additional losses. Placing an entry order to sell above the price where you got in locks in profits.

For example, if you have a BUY EUR/USD position at 1.3900, you could place:

• a stop-loss using a sell entry order (Stop Entry, SE) at 1.3800

or 

• a limit using a sell entry order (Limit Entry, LE) at 1.4000

For Sell Positions

Placing an entry order to buy above the price where you got in protects you from additional losses. Placing an entry order to buy below the price where you got in locks in profits.

For example, if you have a SELL EUR/USD position at 1.3900, you could place:

• a stop-loss by using a buy entry order (Stop Entry, SE) at 1.4000

or 

• a limit using a buy entry order (Limit Entry, LE) at 1.3800

The National Futures Association (NFA), our industry's self regulatory organization in the United States, has informed all Forex Dealer Members, which includes FXCM, that it has adopted new Compliance Rule 2-43(b) regarding forex trading. Read Compliance Rule 2-43(b).

Updates - Forex Facts