Exit the Forex market at
Take profit take orders, allow Forex traders to exit the Forex
market at pre-determined profit targets. If you are short (sold) a
currency pair, the system will only allow you to place a limit order
below the current market price because this is the profit zone.
Similarly, if you are long (bought) the currency pair, the system
will only allow you to place a take profit order above the current
market price. Take profit orders help create a disciplined trading
methodology and make it possible for traders to walk away from the
computer without continuously monitoring the market.
Control risk by capping losses
Stop/loss orders allow traders to set an exit point for a losing
trade. If you are short a currency pair, the stop/loss order should
be placed above the current market price. If you are long the
currency pair, the stop/loss order should be placed below the
current market price. Stop/loss orders help traders control risk by
capping losses. Stop/loss orders are counter-intuitive because you
do not want them to be hit; however, you will be happy that you
placed them! When logic dictates, you can control greed.
Where should I place my
stop and take profit orders?
Trading Strategies - As a general rule of thumb,
traders should set stop/loss orders closer to the opening price than
take profit orders. If this rule is followed, a trader needs to be
right less than 50% of the time to be profitable. For example, a
trader that uses a 30 pip stop/loss and 100-pip take profit orders,
needs only to be right 1/3 of the time to make a profit. Where the
trader places the stop and take profit will depend on how
risk-adverse he is. Stop/loss orders should not be so tight that
normal market volatility triggers the order. Similarly, take profit
orders should reflect a realistic expectation of gains based on the
market's trading activity and the length of time one wants to hold
the position. In initially setting up and establishing the trade,
the trader should look to change the stop loss and set it at a rate
in the 'middle ground' where they are not overexposed to the trade,
and at the same time, not too close to the market.
Trading foreign currencies is a
demanding and potentially profitable opportunity for trained and
experienced investors. However, before deciding to participate in
the Forex market, you should soberly reflect on the desired result
of your investment and your level of experience. Warning! Do not
invest money you cannot afford to lose.
So, there is significant risk in
any foreign exchange deal. Any transaction involving currencies
involves risks including, but not limited to, the potential for
changing political and/or economic conditions, that may
substantially affect the price or liquidity of a currency.
Moreover, the leveraged nature of
FX trading means that any market movement will have an equally
proportional effect on your deposited funds. This may work against
you as well as for you. The possibility exists that you could
sustain a total loss of your initial margin funds and be required to
deposit additional funds to maintain your position. If you fail to
meet any margin call within the time prescribed, your position will
be liquidated and you will be responsible for any resulting losses.
'Stop-loss' or 'limit' order strategies may lower an investor's
exposure to risk.
Easy-Forex foreign exchange
technology links around-the-clock to the world's foreign currency
exchange trading floors to get the lowest foreign currency rates and
to take every opportunity to make or settle a transaction.
Avoiding/lowering risk when
Trading Strategies - Trade like a technical analyst. Understanding
the fundamentals behind an investment also requires understanding
the technical analysis method. When your fundamental and technical
signals point to the same direction, you have a good chance to have
a successful trade, especially with good money management skills.
Use simple support and resistance technical analysis, Fibonacci
Retracement and reversal days. Be disciplined.
Create a position and understand your reasons for having that
position, and establish stop loss and profit taking levels.
Discipline includes hitting your stops and not following the
temptation to stay with a losing position that has gone through your
stop/loss level. When you buy, buy high. When you sell, sell higher.
Similarly, when you sell, sell low. When you buy, buy lower. Rule of
thumb: In a bull market, be long or neutral - in a bear market, be
short or neutral. If you forget this rule and trade against the
trend, you will usually cause yourself to suffer psychological
worries, and frequently, losses. And never add to a losing position.
On Easy-Forex the trader can change their trade orders as many times
as they wish free of charge, either as a stop loss or as a take
profit. The trader can also close the trade manually without a stop
loss or profit take order being hit. Many successful traders set
their stop loss price beyond the rate at which they made the trade
so that the worst that can happen is that they get stopped out and
make a profit.