Sometimes the market does whatever it wants – just face it. Every day is a new challenge to all traders out there and they have to pay attention to everything such as major economic events, central bank rumors, global politics. All this can turn currency prices and make them go high or low, and sometimes this might happen faster than a finger snap.
This means that sooner or later an investor will eventually have to take a wrong position and the market will start working against him. Face it – it is inevitable and sooner or later this will happen. You can’t control the market, but you can take full control of the situation by applying loss strategies. Cutting the loss quickly is an extremely important action and thus you have to know how to do it. If you waste your time, you could blow out your account and end your trading career.
Every trader should not be greedy and keep one statement always in their heads – live to trade another day! As the people have said – the longer you survive, the more you learn and therefore gain experience and increase your success and profits.
The trade management technique you should master is called “stop loss” and it is the type of skill that every trader making its way in this business should learn.
Putting “stops” on the trend means that you will be able to save your money, minimize your loss and at the same time try new opportunities and save your funds for further actions. Losing without a plan might be crucial to you!
The proper stop loss point should be the invalidation point of your trading. It is really important to know this! This means that as soon as the price hits this point a signal should warn you! Then you need to close the position and wait for another chance to trade.
There are many different stop loss methods but the most commonly used ones are:
- Time stop
- Volatility stop
- Chart stop
- Equity stop