Are you experiencing 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 managing my trading, but even more, I recently love trading. I believe, as you’re reading this, you need to do too. So, how do we know when to stop? We need to apply some self-discipline. fusionex
Firmly apply the pursuing forex trading strategy to minimise your losses
When ever to cut your loss
Opening a trading position is not hard – you look for your signals, you decide on your risk, therefore you press the button.
Knowing when to close is considerably harder.
Just how do we know when we should genuinely close a situation, or if we are going to just suffering a circumstance of trader’s jitters?
Why don’t we say you entered a long trade, and the significance of that instrument has taken down, leaving you sensing decidedly uncomfortable.
Jumping away with this position now is what a gambler might do.
But we’re investors – not gamblers.
Consider a look at the set-up that got you into it in the first place – what was the storyline that triggered you to buy? If it was depending on technicals or fundamentals, or both, there should have recently been a signal that induced one to open this trade.
Are those indicators still in position, or has some news or technological indicator negated them?
To get example, perhaps the price has fallen through an important support level that was part of your set-up. Or simply your company was based upon fundamentals, and earning figures have recently been released that have been worse than expected.
These are generally the sort of reasons to cut your failures.
If, on the other hand, the story that led you into this trade remains to be in place, then you should adhere with your position.
Why don’t we say you purchased a stock that you thought to be undervalued. In the interim, the price drifted down. Unless some evidence appeared that your original value was flawed, you cannot find any reason to exit this company.
That’s not to say that you allow your losses to run consistently. If the losses that you are running on a trade becoming abnormal in relation to the size of your stock 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 level – more on computerized stops in a moment).
When to close a winner
It might be just as tricky knowing if you should close out a winning investment – although it’s generally a much more nice problem to have.
Let’s imagine you have a trade in place that’s in profit, but languishing some way from the profit target.