How To Place Stop Losses?
The intra day forex market is full of noise that it becomes difficult for new traders to understand where to put the stop loss. There is so much noise in the forex markets in the short run that prices tend to jump 10-20 pips for no apparent reason.
This becomes frustrating for many new day traders. Most constantly find their stop losses being tripped due to noise even when the rates are going in the anticipated direction.
A static 10-20 pip stop loss is an arbitrary choice many traders make. Many new traders also use Trailing Stop Loss. Place your trailing stop loss too close and you will find your stop hit too early. Place it too far and you will have to forgo potential profits if the price retraces.
Many professional forex traders do use stop loss but mostly place it on their computers hiding them from their brokers. Best way to place a stop loss is using a dynamic level.
Because if brokers find many stop losses at a particular price level they can easily trip them using a momentary blip in their price feeds. You cant do anything. It was a momentary spike during to a sudden large transaction in the market. This is known as Stop Hunting.
Do you know this many professional forex traders only use a stop loss in their mind. They plan entry/exit for each position. Keep on monitoring it changing, the stop loss in their mind as the rate fluctuates. When they reach the desired outcome, they close the position. With experience, you will also learn to do the same.
Moving Averages, Bollinger Bands, SARs etc can be easily used as dynamic stop losses by you. It is a good way to manage your risk while letting the currency markets to do what it wants.
The more experience you will develop as a forex trader the more you are going to understand that placing fixed stop losses actually hurts more. Using fixed stop losses can hurt you more emotionally, psychologically and profit wise than help you.
Try not to trade just before or after a major economic news release. Try not to place stop loss close to/at round numbers. And try not trade in times of thin liquidity in the currency markets.
It is important for you to know that brokers constantly use stop hunting to take out your positions using noise in the market as an excuse. Learn how to beat the markets and the brokers. - 23221
This becomes frustrating for many new day traders. Most constantly find their stop losses being tripped due to noise even when the rates are going in the anticipated direction.
A static 10-20 pip stop loss is an arbitrary choice many traders make. Many new traders also use Trailing Stop Loss. Place your trailing stop loss too close and you will find your stop hit too early. Place it too far and you will have to forgo potential profits if the price retraces.
Many professional forex traders do use stop loss but mostly place it on their computers hiding them from their brokers. Best way to place a stop loss is using a dynamic level.
Because if brokers find many stop losses at a particular price level they can easily trip them using a momentary blip in their price feeds. You cant do anything. It was a momentary spike during to a sudden large transaction in the market. This is known as Stop Hunting.
Do you know this many professional forex traders only use a stop loss in their mind. They plan entry/exit for each position. Keep on monitoring it changing, the stop loss in their mind as the rate fluctuates. When they reach the desired outcome, they close the position. With experience, you will also learn to do the same.
Moving Averages, Bollinger Bands, SARs etc can be easily used as dynamic stop losses by you. It is a good way to manage your risk while letting the currency markets to do what it wants.
The more experience you will develop as a forex trader the more you are going to understand that placing fixed stop losses actually hurts more. Using fixed stop losses can hurt you more emotionally, psychologically and profit wise than help you.
Try not to trade just before or after a major economic news release. Try not to place stop loss close to/at round numbers. And try not trade in times of thin liquidity in the currency markets.
It is important for you to know that brokers constantly use stop hunting to take out your positions using noise in the market as an excuse. Learn how to beat the markets and the brokers. - 23221
About the Author:
Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in investing; stock and forex trading. Discover a revolutionary new broker buster Forex Robot. Learn Forex Trading!
posted by X - Men @ 2:00 AM
0 Comments
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home