October 26, 2017

Forex Trading Strategies: "Stop-Loss" So "Stop-Profit"

The forex market is a very dynamic environment with a variety of aspects that need to be taken care of by a trader in the exercise of his forex trading strategies. The large number of important things to note sometimes make a trader to forget things that are (considered) is small, but it turned out to have a major impact. One of the things often are considered "minor" it is a stop-loss, which in fact turns out to be able to change your world. Learn forex in this time, we will learn to better understand "the little", which turned out great.

Stop-loss  its full name is the stop-loss order  it could be a very useful tool, if you know how to use it. Let's Peel these forex trading strategies.

What is stop-loss is it?
Stop-loss order is actually placed to close an open transaction for the purpose of limiting the risk of loss. For example, you open a forex transactions: Buy 1 lot AUD/USD at price of 0.81400. As a forex trading strategy for limiting the risks in trading you place a stop-loss at a price of 0.81000. This means if the price then dropped to 0.81000, then your transaction will be closed at the price of 0.81000 with a loss of$400.

forex trading strategies

Positive and negative sides
No one wants to suffer losses, but trading inevitably you must learn the risks faced.Have mentioned before that you can limit the risk of loss which may be suffered by placing a stop-loss.

The positive side of placing a stop-loss is you don't have to constantly look at the graph of the price movement. Simply place a stop-loss level and your risk is already restricted by itself, without the need of you glued in front of your monitor. In fact  its extreme  you can switch off your computer and go shopping, play billiards, or watching your favorite movie. Your risk is already limited by a stop-loss.

But every thing has a positive side of negative at the same time, as well as stop-loss.
Such a scenario may occur: stop-loss that you place only "poked" by price movements, and then the price reverses direction and precisely meet Your profit target. For example, in the example above mentioned transaction (Buy 1 lot AUD/USD at price 0.81400; stop-loss price 0.81000): after the price touched 0.81000 levels (stop-loss) then turns direct price rebound and even reach the figure of 0.81800. Heart breaking enough, huh?

But try to think like this: you never know what will happen next. In other words, you in fact anyone  never know for sure the next market movement. In all probability forex trading can happen: the price may rebound, but CAN ALSO CONTINUE the MOVEMENT DOWN so that your losses will be even greater and forex trading strategy that you have piles of hard-earned was no longer useful. All opportunities are open.

The question then is: are you willing to face losses that are greater than just minus$400? Which is more painful: the lost $400 (in accordance with Your risk tolerance),or having a much bigger loss because you do not limit your risks?

The most important thing is that stop-loss allows a trader to immediately make a decision without the involvement of emotions. People tend to "fall in love" on transactions; He does not want to throw away those deals despite ever increasing losses. Such traders always hoping and hoping the market would turn direction. Whereas, in anticipation of that, the risks it faces increasingly enlarged.

The rules place a stop-loss
In forex trading, you should even BE OBLIGED – Learn forex strategy that is necessary to limit the risks. All successful traders agree with this.

The key to minimize the possibility of stop-loss "affected" by the movement of prices is the technique of placing a stop-loss it self. We recommend that you follow the signals in the time-frame which is not too short to avoid the price movement that all of a sudden. Stop-loss that is left you a few pips above key resistance (if your position is to sell) or below key support (if your position is to buy). Generally, there is a technical method that teaches putting around 100-200 pips (to quote 5 decimals). There are many methods to determine key support and resistance, you can learn it alone.

More importantly is to place stop-loss in accordance with the risk tolerance you have defined in the trading plan. For example, you have a capital of $10.000 and allocate the risk of 5% per transaction, then Your stop-loss should not be more than of $500.

Not just limit losses
The origins of stop-loss indeed aims to limit losses, in accordance with its name. But in the process, stop-loss turned out to be also to let the profits you earn potentially be getting bigger. How do you do?

The technique is called "trailing stop". In this case, "stop-loss" is no longer functioned to limit losses, but rather "lock" a certain level of profits. What's the story?

Let's return to the example of a transaction that was previously mentioned. Assume you do forex trading and open position Buy AUD/USD at price of 0.81400. You have learned that You have to limit risk, and as his forex strategies you place a stop-loss at 0.81000.

It turns out then the price keeps moving up; say to 0.82000. At that level, you have the floating profit gain (unrealized profit) of $600 (the floating profit condition is when the position You've been lucky but the position has not yet been closed). In these conditions, instead of closing Your transaction, thus moving (the term amend) stop-loss who used to be in the 0.81000 to 0.81600. Thus, if later the price dropped from 0.82000 to 0.81600, your position will be closed in the range of 0.81600, with a profit of $200.
Forex trading strategy
In forex trading, stop-loss is a forex trading strategy that is most easy yet very significant impact in the effort you limit risk. It is true that there are other ways such as switching or averaging, but all it have side effects in the form of the psychological burden that much greater.

Although easy unfortunately many traders who "failed" to use it, whether it's to limitrisk as well as locking in profit. You should treat your stop-loss such as insurance premiums, where you never expect to be using it but when the risk occurs, you keep your cool because you know that you already have a safety net.

Losers indeed awful, yet more awful again if the losses suffered due to the growing is not restricted. The pain in the wallet tuh ....

So, use stop-loss.

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