When trading the Forex market, it is
essential that you know when to cut your losses. In life some things are guaranteed, like death and taxes.
Similarly, in Forex trading, you are guaranteed to suffer a few losses
occasionally no matter how good your forex trading strategy is. Forex Trading Broker India
By being able to identify when it is
time to get out of a trade, you can keep your losses small, which will in turn
allow you to continue trading when the market behaves as you predict. What
separates the winners from the losers is how you handle those trades that run
into losses. “Cut your losses and let your profits
run” is a very practical piece of advice which you should always stick to since
one bad trade can wipe out your entire forex account even if you were just from
a winning streak for the last one hundred trades.
How to know when to stop:
There are several methods that you can
use in order to determine when to stop the trade, but they all have one similar
component: acknowledging a specific point on the chart that represents when
your analysis isn't correct. Open PAMM Manager Account
Determine the Bad trades:
The first duty of all Forex traders is
to protect their capital investment. Therefore, even when you suffer a few losses,
your Forex capital should remain significant enough to enable you to continue
trading and possibly regain your losses.
To achieve
this, you have to learn how to detect bad trades early enough before your
losses turn into extremely large and unmanageable amounts. To achieve this, you
have to learn how to detect bad trades early enough before your losses turn
into extremely large and unmanageable amounts. For early detection, you can
check on the following points:
Reversal Points:
If the trade is placed too close to a
reversal point, then it is potentially a bad trade.
Resistance:
If the long order placed at a resistance
level, that is potentially a bad trade.
Support:
If the short order placed very close to
a support level, that may be a bad trade.
Actions to Take
on Bad Trades:
Once you have determined that you are on
a bad trade with no chances of reversal, you should act fast and decisively to
limit the extent of your losses. There are different exit strategies which Forex traders use to exit trades.
Most well organized Forex traders have
an exit strategy for every bad trade they find themselves in. A common
strategy is using the percentage retracement method. This means that if a trade
goes to a 3% loss level compared to the total amount of your Forex account,
then it is time to exit.
Some of the exit methods include:
Limit orders:
A trader can instruct the broker to buy
or sell a currency when it gets to a certain price. In this way, the trader
avoids running into very high losses.
Stop Loss orders:
A very common method is to simply place
a stop loss at a point that you feel represents that things are changing in the
marketplace. For example, many traders will place their stop loss below the
most recent swing low (in a long order) or the most recent significant swing
high (in a short order). By doing this, you are forcing the market to change
recent trends in order to take you out. It proves to you that the market isn’t
going where you thought it was, and you need to step back and rethink your
position. By doing this, you can take yourself out of the emotion of the moment
and begin to clearly see the opportunities that may or may not be there. Forex White Label Solutions
Trailing Stop:
A trailing stop is a kind of stop loss
order that shifts as your profits increase. You may set it to follow the price
15 pips behind so in case of a price movement reversal, you will automatically
exit the trade only 15 pips behind your highest profit level.
Regards,
BlueMax Capital Ltd,
Mobile : +91 9940999060
E-mail : info@bluemaxcapital.com
Web : www.bluemaxcapital.com
