Traders enter into a long or short futures trade with a couple of price levels in mind. One is the price target, and the second is a stop price or other parameter they’ll use to determine whether it’s time to exit a trade at a loss. This price may be a function of a trader believing a trend they were riding is no longer in place or may be based on their own maximum loss threshold. Some traders will set an alert that notifies them of this violation of negative price action or others may actually place an order to exit a trade if this price threshold is hit. Any traders that do not have some sort of risk management method in place will not be traders for long.
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