Risk management

How to Use Stop Loss and Take Profit in Forex

Astron Team · 09/24/2026 · 4 min read

In the forex market, where prices move by fractions of a cent all the time, deciding where to exit a trade is just as important as deciding where to enter. The two most basic tools for this are the stop loss, which limits the maximum acceptable loss, and the take profit, which sets the trade's target gain. Used correctly, they take the exit decision out of the realm of emotion and put it into the realm of planning.

In this article you'll see what these two orders are, how to calculate their levels in practice, and how to build a balanced risk-reward ratio in a forex trade.

What stop loss and take profit are

The stop loss is an order set to automatically close a trade when the price reaches a predefined level against you, limiting the loss to an amount known in advance. The take profit works in mirror image: it closes the trade automatically when the price reaches a profit level you've already decided to accept.

Both orders exist to solve the same problem: without them, the decision to exit a trade is left to the mood of the moment, and it's exactly at that moment — when the price is against you or when it's already well in your favor — that most traders make their worst decisions, whether out of hope for a recovery or greed for a bigger profit.

Calculating the stop loss in pips and in money

In forex, price movement is usually measured in pips. Suppose a trade on the USD/BRL pair, with a R$ 5,000 account and a lot size that makes each pip worth R$ 10. If you decide to risk at most 1% of the account on this trade, that equals R$ 50 — meaning a stop 5 pips away from the entry price.

This calculation should always come in two steps: first define how much money (or what percentage of the account) you're willing to lose, then calculate what distance in pips that amount corresponds to, given the position size. Doing it the other way around — choosing the stop by the distance on the chart and only then seeing how much that represents in money — is what leads many people to take on bigger risks than they intended.

Placing the stop and target based on the chart

Placing the stop loss at a round number of pips, with no connection to the chart, is a common mistake. The ideal is to place it at a point that, if reached, would truly invalidate the trade idea — for example, slightly below a recent support, in the case of a buy, or slightly above a recent resistance, in the case of a sell.

The take profit, in turn, is usually placed near the next relevant support or resistance level, or calculated as a multiple of the stop's own distance. If the stop is 5 pips away and the target is 15 pips away, this trade's risk-reward ratio is 1 to 3: for every R$ 1 risked, R$ 3 of return is sought.

Why the risk-reward ratio matters more than your win count

With a 1 to 3 ratio, it's possible to win only one trade out of four attempts and still come out ahead: three R$ 50 losses add up to R$ 150, against a single R$ 150 gain on the winning trade — a break-even result, not counting any costs. Any win rate above 25%, keeping this same ratio, already produces a positive result across multiple trades.

This is why setting the stop loss and take profit before entering the trade, calculating the ratio between the two, matters more than trying to get every entry right. Good risk management tolerates mistakes; what it doesn't tolerate is trading without knowing, in advance, how much you're willing to lose.

Putting it into practice

On Astron, as on most forex platforms, you can set the stop loss and take profit at the moment the order is sent, without needing to watch the price the whole time. It's worth reviewing these levels whenever the chart's context changes significantly, but avoid moving the stop just to "give the trade another chance" — that's one of the most common ways to turn a small, planned loss into a large, unplanned one. The forex market involves leverage and fast moves, and even with a well-defined stop loss and take profit, every trade carries real risk of loss.