Stop-loss and take-profit orders are risk management tools that traders can use to limit their potential losses and lock in profits in the forex market.

A stop-loss order is an order to sell a currency at a specified price, which is typically below the current market price. The purpose of a stop-loss order is to limit potential losses by automatically selling the currency if it falls to a certain level.

A take-profit order is an order to sell a currency at a specified price, which is typically above the current market price. The purpose of a take-profit order is to lock in profits by automatically selling the currency if it rises to a certain level.

Traders can set stop-loss and take-profit orders to manage risk and protect against potential losses. For example, if a trader buys a currency at 1.2000 and sets a stop-loss order at 1.1900, the trade will be automatically closed if the currency falls to 1.1900, limiting the trader’s potential losses. Similarly, if a trader buys a currency at 1.2000 and sets a take-profit order at 1.2100, the trade will be automatically closed if the currency rises to 1.2100, locking in the trader’s profits.

It’s important to note that stop-loss and take-profit orders are not guaranteed and may not always be filled at the specified price. Factors such as market liquidity and volatility can impact the execution of these orders.