Do you have a forex trading strategy that you stick to religiously?
What’s your biggest trading mistake?
Do you have one trap that you fall into again and again? Mine is knowing when to stop.
I love making money from my trading, but even more, I just love trading. I suspect, as you’re reading this, you do too. So, how do we know when to stop? We need to apply some discipline.
Firmly apply the following forex trading strategy to minimise your losses
When to cut your losses
Opening a trading position is easy – you look for your signals, you decide on your risk, and you press the button.
Knowing when to close is considerably harder.
How do we know if we should genuinely close a position, or if we’re just suffering a case of trader’s jitters?
Let’s say you entered a long trade, and the value of that instrument has shot down, leaving you feeling decidedly uncomfortable. 대여계좌
Jumping out of this position now is what a gambler might do.
But we’re traders – not gamblers.
Take a look at the set-up that got you into this position in the first place – what was the story that caused you to buy? Whether it was based on technicals or fundamentals, or both, there should have been a signal that caused you to open this trade.
Are those signals still in place, or has some news or technical indicator negated them?
For example, perhaps the price has fallen through an important support level that was part of your set-up. Or perhaps your trade was based on fundamentals, and earning figures have been released that were worse than expected.
These are the kind of reasons to cut your losses.
If, on the other hand, the story that led you into this trade is still in place, then you should stick with your position.
Let’s say you bought a stock that you believed to be undervalued. In the meantime, the price drifted downwards. Unless some evidence emerged that your original valuation was flawed, there is no reason to exit this trade.
That’s not to say that you allow your losses to run indefinitely. If the losses that you are running on a trade becoming excessive in relation to the size of your portfolio, you should close that trade (I’d hope that with sound money management and a sensible stop loss, you’d not have to reach this stage – more on automated stops in a moment).