Stop loss and take profit
What you learn in 3 minutesA stop loss and a take profit are two instructions you attach to a position when you open it. One closes the trade if the market moves against you, at a loss you chose in advance. The other closes it if the market moves in your favour, at a profit you chose in advance. On USD/INR, one pip on one standard lot is ₹10, so the size of your position turns a pip distance into a rupee amount.
A 0.10 lot USD/INR trade with a 20 pip stop and a 40 pip target
| Step | Amount | Note |
|---|---|---|
| Position size | 0.10 standard lot | one tenth of a standard lot, so one pip is worth one tenth of ₹10 |
| Value of one pip | ₹1 | ₹10 per pip on a standard lot multiplied by 0.10 |
| Stop loss distance | 20 pips | the distance from entry to the stop, chosen before the trade |
| Loss if the stop is hit | −₹20 | 20 pips multiplied by ₹1 per pip |
| Take profit distance | 40 pips | the distance from entry to the target, chosen before the trade |
| Profit if the target is hit | +₹40 | 40 pips multiplied by ₹1 per pip |
Brokers vary in how they round pip values, and many add a spread or commission on top. The exact rupee figure you see can differ from the one calculated here.
The mistake people make here
The common mistake is to set the stop loss after the trade has already moved against you, or to move it further away to avoid being closed out. That turns a planned loss into an unplanned one, and the amount can grow well beyond the ₹20 in the example. Decide both levels before you enter, write them down, and leave them alone. If the market hits your stop, the trade is over and the loss is the one you agreed to.Check yourself
You trade 0.20 lots of USD/INR with a stop loss 15 pips away. What is the loss in rupees if the stop is hit?
One pip on 0.20 lots is ₹10 multiplied by 0.20, which is ₹2. The loss is 15 pips multiplied by ₹2, which is ₹30.
On the same 0.20 lot trade, you set a take profit 30 pips away. What is the profit in rupees if it is hit?
One pip is still ₹2. The profit is 30 pips multiplied by ₹2, which is ₹60.