Stop loss and take profit
On EUR/USD, one pip on one standard lot is worth 10 units of the quote currency, so the money value of a stop or target depends on your lot size and the exchange rate into pesos. We work through a 0.10 lot trade with a 20 pip stop and a 40 pip target, priced in ₱.
Where the stop sits on the chart and why the distance is a choice you make
On a EUR/USD chart around 1.0850, price moves in small steps called pips. A stop loss is a line you place at a chosen distance from your entry, on the losing side of the trade. If you buy at 1.0850, your stop sits below that price. If you sell, it sits above. The chart shows the line as a horizontal level, and the distance in pips is the gap between entry and stop.
You choose that distance before you enter. It is not set by the market or by your broker. A common approach is to place the stop beyond a recent swing high or low, because those are prices where the market already turned. That does not mean price will stop there again. It means you are giving the trade room to move without closing it on ordinary noise.
The same logic applies to the take profit, but on the winning side. If you buy at 1.0850, the take profit sits above. If you sell, it sits below. The distance in pips is again your choice. Some people use a multiple of the stop distance, such as twice as far. Others use the next chart level where price stalled before. Either way, both lines are drawn on the chart before you click buy or sell.
How the pip distance turns into a peso amount on your account
The chart shows pips. Your account shows pesos. The link between them is the pip value, which depends on your lot size and the exchange rate from the quote currency to pesos. For EUR/USD, the quote currency is US dollars, so the pip value in dollars is converted to pesos at the current rate. That rate moves, so the peso value of a pip changes from day to day.
On 0.10 lots of EUR/USD, one pip is worth about ₱58 at the conversion rate used in this lesson. That figure is an example. Your broker may round pip values, charge a spread when you open and close, and add commission or swap. Those charges vary between brokers and reduce the figures shown. The ₱58 is a working number for the arithmetic, not a fixed rate.
Once you know the pip value, the rest is multiplication. A stop 20 pips away on 0.10 lots risks 20 times ₱58, which is ₱1,160. A take profit 40 pips away targets 40 times ₱58, which is ₱2,320. If you change the lot size, the pip value changes in proportion. At 0.05 lots, one pip is about ₱29, so the same 20 pip stop risks ₱580.
Why the stop and target belong on the chart before you enter
A stop loss is not a prediction. It is an instruction that closes the trade if price reaches a level you picked in advance. The same is true of the take profit. Both are orders that sit with your broker and act without you watching the screen. If you do not attach them, the trade stays open until you close it manually, and the loss or profit is whatever the market gives you at that moment.
The common mistake is to set the stop after the trade has already moved against you, or to move it further away to avoid taking the loss. That turns a planned loss into an unknown one. The chart does not care where you want price to go. If you widen the stop, you are risking more than you decided, often at the worst moment. The same applies to moving the take profit closer out of fear, which cuts a planned gain short.
Deciding both levels before entry keeps the risk and the target fixed. You can then check the peso amount against what you are willing to lose on a single trade. If the stop distance times the pip value is more than that amount, reduce the lot size instead of widening the stop. The chart stays the same. Only the size of your position changes, and with it the peso risk.
0.10 lots, 20 pip stop and 40 pip target
| Step | Amount | Note |
|---|---|---|
| Position size | 0.10 lots of EUR/USD | 0.10 of one standard lot, which is 100,000 units |
| Value of one pip | ₱58 | one pip on 0.10 lots is 1 unit of the quote currency (0.10 × 100,000 × 0.0001 = 10, then × 0.10); converted at an assumed rate of ₱58 to 1 unit of the quote currency |
| Stop loss distance | 20 pips | placed below the entry price, chosen before the trade opens |
| Loss if the stop is hit | −₱1,160 | 20 pips × ₱58 per pip |
| Take profit distance | 40 pips | placed above the entry price, chosen before the trade opens |
| Profit if the target is hit | +₱2,320 | 40 pips × ₱58 per pip |
The conversion rate used here is an example only and changes with the market. Your broker may round pip values, charge a spread when you open and close, and add commission or swap; those charges vary between brokers and reduce the figures shown.
Doing it once, step by step
The following steps walk through placing a stop loss and a take profit on a EUR/USD trade, using the chart first and the peso arithmetic second. Work through them in order on a demo account before using real money.
- 01
Open the EUR/USD chart and mark the entry price
Look at the chart around 1.0850 and decide whether you would buy or sell. Mark the current price as your entry. This is the level from which both the stop and the target are measured. Write it down so you do not rely on memory.
- 02
Find a level for the stop on the losing side
If you are buying, look below the entry for a recent swing low or a price where the market turned up before. If you are selling, look above for a recent swing high. Place the stop a few pips beyond that level, not exactly on it. Note the distance in pips from entry to stop.
- 03
Choose a take profit distance and mark it
On the winning side, pick a level where price stalled before, or use a multiple of the stop distance. For example, if the stop is 20 pips, a target 40 pips away gives twice the distance. Mark that level on the chart and note the pip distance from entry.
- 04
Convert both distances to pesos using the pip value
Check your lot size and find the pip value in pesos. On 0.10 lots of EUR/USD, one pip is about ₱58 at the example rate. Multiply the stop distance by that figure to get the risk, and the target distance by the same figure to get the potential gain. Write both peso amounts down.
- 05
Compare the risk to what you are willing to lose
If the stop loss amount is more than you are willing to lose on one trade, reduce the lot size. Do not widen the stop to make the number smaller. Recalculate the pip value at the new lot size and check again. Only enter when the risk fits your limit.
- 06
Attach both orders before you enter the trade
Set the stop loss and take profit orders at the levels you marked, then open the position. Once the trade is live, leave both orders where they are unless your original reason for the trade has changed. Moving them after entry is how a planned loss becomes an unknown one.
The mistake most people make here
The common mistake is to set the stop after the trade has already moved against you, or to move it further away to avoid taking the loss. That turns a planned loss into an unknown one. Decide both the stop and the target before you enter, and write down the peso amount you are risking. If that amount is more than you are willing to lose on a single trade, reduce the lot size instead of widening the stop.Check yourself
On 0.10 lots of EUR/USD, with one pip worth ₱58, what is the loss if a 15 pip stop is hit?
15 pips × ₱58 per pip = ₱870.
If the take profit is 45 pips away on the same 0.10 lot position, what is the profit at ₱58 per pip?
45 pips × ₱58 per pip = ₱2,610.
A stop is 25 pips away and the reader wants to risk no more than ₱1,000. At ₱58 per pip on 0.10 lots, is the risk acceptable?
25 pips × ₱58 = ₱1,450, which is above ₱1,000, so the risk is not acceptable; the lot size would need to be reduced.
Questions that come up next
What happens if I do not set a stop loss at all?
Without a stop loss, the position stays open until you close it yourself. If price moves against you, the loss can grow beyond any amount you planned. The chart will keep showing the position in the red, and the peso loss changes with every pip. You keep the decision, but you make it while the market is moving, not before.
Can I change the stop loss after the trade is open?
Yes, most platforms let you move the stop loss line on the chart. Moving it closer reduces the risk but also makes it more likely that ordinary price movement will close the trade. Moving it further away increases the loss if it is hit. If you move it, write down the new peso risk so you still know what is at stake.
Does the take profit close the trade automatically?
Yes. When price reaches the take profit level you set, the platform closes the position and the profit is added to your account balance. The same happens with the stop loss: when price reaches that level, the trade closes at a loss. Both orders work while you are away from the screen, as long as your platform is connected.
How do I know the pip value in pesos before I trade?
Your broker's platform usually shows the pip value for the lot size you choose, but it may be in the quote currency. For EUR/USD, that is US dollars, so you convert to pesos at the current exchange rate. The rate moves, so the peso value changes. The ₱58 per pip used in this lesson is an example for 0.10 lots, not a fixed number.
What if the market jumps past my stop loss?
A stop loss is an instruction to close at the next available price once your level is reached. If the market moves very fast, the price you get may be worse than the level you set. This is called slippage, and it can make the loss larger than the figure you calculated. It does not happen on every trade, but it is a reason to keep your risk small.
Do I need to use a take profit every time?
No, you can leave the trade open and close it manually. But without a take profit, you decide the exit while price is moving, which can lead to holding too long or closing too early. Setting a take profit in advance fixes the profit you are aiming for and removes that decision from the moment.
The words used on this page
- Stop loss
- An order attached to a position that closes it at a loss you chose before entering. It sits at a set distance in pips from your entry, on the losing side of the trade.
- Take profit
- An order attached to a position that closes it at a profit you chose before entering. It sits on the winning side of the trade, at a distance you set in pips.
- Pip
- The smallest common price step on a currency pair. On EUR/USD around 1.0850, a move from 1.0850 to 1.0851 is one pip.
- Lot
- A standard unit of trade size. One standard lot is 100,000 units of the base currency. A 0.10 lot is one tenth of that, so pip values are smaller.
- Pip value
- The money value of one pip for your lot size, in the quote currency. It changes with lot size and with the exchange rate into pesos.
What to take away
- A stop loss and a take profit are two prices you choose before you enter, not after.
- The distance in pips becomes a peso amount through the pip value for your lot size.
- If the peso risk is more than you are willing to lose, reduce the lot size rather than widen the stop.
- The conversion rate and broker charges vary, so recalculate the figures for your own account.