Stop levels in trading refer to the minimum distance required between the current market price and the levels where you can set Stop Loss or Take Profit orders. This distance is set by brokers and varies depending on market conditions and the type of asset being traded.
When placing a Stop-Loss or Take-Profit order, it's crucial to ensure that the order is placed outside of this stop-level range. If the order is too close to the current market price, it may not be accepted by the trading platform.
Stop levels are different from a stop out level, which refers to the point at which your broker will automatically close positions to prevent your account balance from falling below the required margin. Understanding how stop out and stop levels function is essential for effective risk management.
Stop levels help prevent orders from being triggered prematurely due to small price fluctuations, ensuring that trades are executed only when significant market movements occur.