Know How To Place Stop Loss?
The forex markets are highly volatile. There is so much noise in the intra day forex market; it becomes difficult for new retail forex traders to know where to put the stop loss. The prices in the intra day market keeps on jumping 10-20 pips for no apparent reason.
Most of the new forex traders get frustrated to find their stop loss being constantly tripped due to noise even when the market is going in the anticipated direction.
Many new forex traders develop the habit of using a static 10-20 pip stop loss. This is an arbitrary decision. Many also try using a trailing stop loss. However, if placed too close; your stop hits too early. And if placed too far; you will have to forgo potential profits if the price retraces later on.
You should place your stop loss on dynamic levels. Most of the professional traders do use stop loss but mostly place it on their computers making them invisible to their brokers.
Stop hunting is something the brokers are continuously doing. If a broker finds many stop losses at a particular price level on his price feed; he can easily trip them using a momentary blip in the price. You cant even complain. The momentary spike happened due to a sudden large transaction in the market.
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.
Dynamic stop losses can be easily placed using Moving Averages, Bollinger Bands, SARs etc. Using a dynamic stop loss is a good way to manage your risk while letting the currency markets do what it wants.
The more experienced a trader you will become, the more you are going to realize that placing fixed stop losses actually hurts you more emotionally, psychologically and profit wise than help you.
Never ever trade, just before a major economic news release. Dont place your stop loss close to or at round numbers and at times of thin liquidity in the markets.
Stop hunting is something that you should know. Many forex brokers pry on new traders and keep on tripping their stop losses terming it market noise. - 23159
Most of the new forex traders get frustrated to find their stop loss being constantly tripped due to noise even when the market is going in the anticipated direction.
Many new forex traders develop the habit of using a static 10-20 pip stop loss. This is an arbitrary decision. Many also try using a trailing stop loss. However, if placed too close; your stop hits too early. And if placed too far; you will have to forgo potential profits if the price retraces later on.
You should place your stop loss on dynamic levels. Most of the professional traders do use stop loss but mostly place it on their computers making them invisible to their brokers.
Stop hunting is something the brokers are continuously doing. If a broker finds many stop losses at a particular price level on his price feed; he can easily trip them using a momentary blip in the price. You cant even complain. The momentary spike happened due to a sudden large transaction in the market.
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.
Dynamic stop losses can be easily placed using Moving Averages, Bollinger Bands, SARs etc. Using a dynamic stop loss is a good way to manage your risk while letting the currency markets do what it wants.
The more experienced a trader you will become, the more you are going to realize that placing fixed stop losses actually hurts you more emotionally, psychologically and profit wise than help you.
Never ever trade, just before a major economic news release. Dont place your stop loss close to or at round numbers and at times of thin liquidity in the markets.
Stop hunting is something that you should know. Many forex brokers pry on new traders and keep on tripping their stop losses terming it market noise. - 23159
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 @ 2:12 AM
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