Following is a very technical (to me, anyway) article on the best stop loss practices. It includes how and when and where to place stop loss orders.

How To Use Stop Loss in Forex Trading

Many currency traders find it hard to follow simple risk management rules. Many times, they will turn winning positions into losing ones. They will be surprised to find solid trading strategies result in losses instead of profit.

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Most forex traders lose money. They fail to understand and apply proper risk management rules in their trading. Risk management means knowing how much you are willing to risk, and also knowing how much you are looking to gain in a trade.

Without a sense of risk management, many traders hold onto a losing position for an extremely long amount of time and take profit on a winning position far too prematurely. The net result is that traders end up with more winning positions than losing ones, but their account Profit/Loss (P/L) is negative.

Keep these simple risk management rules in mind while trading.

There are two ways to place the stop loss order.

1) Initially place the stop loss at a reasonable level.
2) Trail the stop, meaning move it forward towards profitability as the trade progresses.

An example of the first involves placing the stop loss order 10 pips below the two days low of the currency pair. For instance, if the EUR/USD recent low was 1.1300 and the previous day low was 1.1200, then place the stop loss at 1.1190, 10 pips below the two day low if you want to go long.

If stop loss trading sounds like a foreign language to you, then good – I’m not alone. Even so, this article seems to explain forex stop loss orders in great detail.