Why Majority of forex technical analysis incorporate a stop loss order!
When I first began trading, I found myself wasting a lot of money in search of a perfect forex trading system. I was losing money, but I didn’t want to quit, so I began a long search for tools that would turn my trading around. I found an abundance of educational material that helped me tremendously, and I found a mentor that opened my eyes, but I knew I needed more, I mean a forex technical analysis which use a stop loss order.
In my experience, when most people say “I am a discretionary trader who trade the foreign market using the best forex trading platforms,” it basically means that, they might feel they have 3 or 5 different systems with none of them rigid.
As a result of having no concrete and reliable system to tackle the forex markets and no clearly defined rules, they have no way of effectively managing their open trades.
Before I answer the question which I frequently been asked by most wannabe forex traders, which is why majority of forex technical analysis incorporate a stop loss order!
Let me start by asking you this simple question, how well do you think a company would operate without a clearly define mission statement and a business systems?
If successful companies cannot succeed without a business plan, why you think you can have a trading edge as an individual without it?
The best thing to do is to either stop trading or totally revamp your trading business.
I once meet a currency trader who did tell me this story. “I had this trading system which I bought at a big seminar that kept telling me that things were about to turn around and if I just hung on, it would be ok. Even though I was in a losing position and I kept adding more money. It was the worst thing that ever happened to me because I lost hundreds of thousands of dollars and now I am totally afraid to make a trade. I was in total paralysis, total fear and unable to trade. I still am. I can’t eat, don’t sleep well, my marriage is on the rocks, I have no faith in myself and I think I am about to lose my mind thinking about people in the market being out to get me.”
What kind of advice must I give this individual who was in major trading catastrophe?
Okay I can say to this guy that, from now on he need managed forex Accounts.
What does that mean?
- He was and is out of control.
- He was blinded by his own belief that he was right and the market was wrong.
- Despite all the market evidence to the contrary, he was unable to cut his losses.
- He kept adding to a losing position. He was trading on hope and belief and was blinded completely to the reality of price, which was looking at him.
- With each passing day, his accounts were in increasing drawdown and he became more and more crippled with fear.
- Additionally, his self-esteem was failing and he entered a phase of shame.
- He was paralyzed with fear and remains so to this day.
With each passing day, everyday as he login to his forex trading platforms, his accounts were in increasing drawdown and he became more and more crippled with fear.
The only real solution for this guy was to use a forex technical analysis which incorporate a stop loss order!
There is tremendous value in that, tremendous peace of mind; and it is so much better than making it up as you go along.
A stop order, also called a stop-loss order, is an order you place with your forex trading brokerage company to buy or sell a certain number of lots once a market you are trading hits a certain price, known as the stop or trigger price.
There are two types of sell stops, namely stop orders and stop limit orders.
Many investors have been burned, understand the difference will give you a trading edge and help to save some of your trading capital.
Let me explain it in a different way:
A Stop order:
- This is an o Using stop-losses means you have a plan.
- Knowing what you are going to do after your purchase.
- Stops can be set in many different ways.
A Stop limits order.
This is an order to sell at or above a certain price better known as the limit price after the stop price has been reached. You just have to understand that, the limit price can be above, below or equal to the stop price.
With a stop limit you are not guaranteed an exit even while the market is open.The stop limit is for the person who says, If the currency pair starts to lose, I want to get out, but if it moves very quickly where I would take a large loss, I just want to hang on it. You can place it when immediately when you enter a trade buy or at any time thereafter. You can place it on all or some of your open trades.
Here is the important information every, forex technical trader who trades the FX markets using stop loss order:
Stop orders can be useful if you are not tracking the market all day on your computer or mobile device, but they cannot guarantee a wise investment move.
Although investors get more interested in stop orders when the market is fluctuating wildly, they work best in normal or slow-moving markets.
Thank you for reading my Blog post which was aim at explaining the real reasons why majority of forex technical analysis incorporate a stop loss order!
From: Patrick Sekhoto
