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.
Most of the new day traders use a static 10-20 pip stop loss. This is an arbitrary choice many traders make. How about using a trailing stop? If you place the trailing stop loss too close; you will find your stop hit too early. And if you place it 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.
No body will ever tell you that your broker may be stop hunting against you. When a broker finds many stop loss orders at a particular rate on his price feed; he will try to trip these stops using a momentary blip in the feed. If you complain the broker will explain that the momentary spike happened due to a sudden large transaction in the market.
More often than not, professional traders, trade with a stop loss at all, only keeping a mental stop loss. But you will need a lot of experience to trade this way.
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 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. - 23226
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.
Most of the new day traders use a static 10-20 pip stop loss. This is an arbitrary choice many traders make. How about using a trailing stop? If you place the trailing stop loss too close; you will find your stop hit too early. And if you place it 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.
No body will ever tell you that your broker may be stop hunting against you. When a broker finds many stop loss orders at a particular rate on his price feed; he will try to trip these stops using a momentary blip in the feed. If you complain the broker will explain that the momentary spike happened due to a sudden large transaction in the market.
More often than not, professional traders, trade with a stop loss at all, only keeping a mental stop loss. But you will need a lot of experience to trade this way.
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 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. - 23226
About the Author:
Mr. Ahmad Hassam is a Harvard University Graduate. He is interested in investing; options and forex trading. Discover a revolutionary new broker buster Forex Robot. Learn Forex Trading!
posted by X - Men @ 4:43 AM
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