Thursday, February 01, 2007

Forex Day Trading System - Importance of correct stops

Forex Day Trading System - Importance of correct stops

Out of very limited % of traders who apply stop-loss when placing trade, majority don't knw how to apply stop losses..Majority place stop loss just for the sake of putting it..

Stop losses are important to assure you against running steeply in your account balance incase the trade you made is running against you..For any trader its a very important concept.. Especially when you cannot watch your trade the entire day, like me.

However placing an incorrect stop is something like giving away your money to the market... How many times do you see that after you have placed a day trade using any system, forex market runs against your trade, hits your stop lossand then turns in your favour.. But by then its of no use for you since you are already out of the market..

Here are some suggestions on placing stops -

1. Place stop on the basis of system for trading you are using.. For e.g., you can put it few pips below a particular technical indicator you are using such as an EMA or a candlestick or support / resistance levels.

2. Place the stop loss such that currency pair has some free hand to move.. E.G if you place the stop loss of 15 pips when placing a day trade on 1 hr chart, its not going to work most of the times.

3. Keep adjusting your stops to block your profits..

Thats all in today's session on learning currency trading.. Please visit again to learn more.

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