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How To Lose Small When Trading BigLosing trades aren't always bad. It's when you don't manage the trade before you lose that can make losing trades bad. Let me walk you through 4 positions that I stacked week and show you how I avoided losing thousands of dollars and kept the loss to under 1%. Firstly, it's important to understand that I am a swing trader which means I observe a variety of higher timeframes. Secondly, I use my own strategy called TMP. It's based around every pullback within the trend cycles so I can trade the continuation of the trend. Thirdly, This analysis was mostly done on the weekly, daily, 4 hour, and 2 hour timeframe. Lastly, I aim for more than 2:1 reward to risk trades and for these trades I was sure to keep my losses below $500 a trade. Trade 1 s3.tradingview.com This trade was based on the weekly timeframe. The reward to risk was around 4.50 and I knew I'd be in this trade long term. Probably around a month or so, maybe longer. I risked 0.50% in the trade because I needed to build the analysis and I knew I wanted to stack more trades in case price went my way which you will see me begin to build in the new few trades. Trade 2 s3.tradingview.com This trade was based on the 4 hour timeframe. Price made a new higher high on the 4 hour. I set a pending order so when price pulled back it would trigger me into the trade. This trade was a 8:1 reward to risk ratio. I risked 0.50% on this trade. Price began to go my way. I felt good about the trade. Trade 3- Trailing the stop begins s3.tradingview.com Price made a new higher high. I had to drop down to the 2 hour timeframe to get a good view of this trade. My feelings on this trade was neutral. I reminded my self that no matter what I'd follow my rules. So I set another pending order and went about my day. The Reward to risk on this trade was a 16:1. I risked 0.25% on this trade. Now at this time I'm sitting at 1.25% of risk in 3 trades. This was when I decided to move my stop loss on both trades underneath the third trades higher low. I had just a little risk left on both of these trades but nothing heart stopping. I was stoped out of the third position for a for around -0.27%. But my first two trades continued to run. Trade 4- The last stand s3.tradingview.com Then price went my way. I realized I wanted to be long again and the entry sat right where I'd just entered my precious losing trade. The reward to risk was 19:1. Whew! This was the opportunity of opportunities for me this week and I couldn't avoid entering. So I set another pending order to buy. It triggered and a few hours later, I lost the trade. and my other trades were taken out as well. I lost a total of $761. This was only 0.76% loss in my account because of how I managed my trades as price went up in profit. Had I kept my trades at the same risk(1%) and never moved my stop loss I could have lost $4000 this week. The key to losing small is to build out your positions each time price makes a new high or low depending on the direction of the trade. I built 4 positions and I have to say I would do it again. The potential for big rewards to risk got me, and I knew risk 1% on each trade would have meant I'd lose my funded account due to their drawdown rules. I cannot lose 3% in one day. Thats very manageable when you decrease your risk per trade. Thats what had to be done. If you don't think you can pass a challenge by decreasing you risk, your rewards aren't big enough. If you learn anything from the trades I entered this week, the previous statement above is how can lose small while trading big. Do I still believe NZDCAD can go up? Yes! As long as price stays above the weekly higher low. I'll build out this scenario again. Well, I really do pray you enjoyed this recap from my trading this week. I had no other trades on my other currency pair so it was a smooth trading week. Be sure to like this article if you enjoyed it and found it intriguing. If you have any questions do ask them below. Much love and blessing❤️ Shaquan
Long
by ShaquanLopez
2
NZD/JPY Trading Opportunity! BUY! My dear subscribers, This is my opinion on the NZD/JPY next move: The asset is approaching an important pivot point 87.48 Bias - Bullish Technical Indicators: Pivot Points High anticipates a potential price reversal. Super trend shows a clear buy, giving a perfect indicators' convergence. Target - 89.00 My Stop Loss - 86.39 About Used Indicators: The average true range ATR plays an important role in 'Supertrend' as the indicator uses ATR to calculate its value. The ATR indicator signals the degree of price volatility. ——————————— WISH YOU ALL LUCK
Long
by AnabelSignals
2
Analysis: AUD/JPY Bullish Flag Pattern Breakout TradeAnalysis: AUD/JPY Bullish Flag Pattern Breakout Trade Based on my analysis of a bullish flag pattern breakout in AUD/JPY, i have formulated a trade plan to capture the continuation of the bullish trend. Here is a breakdown of your trade plan: Currency Pair: AUD/JPY Entry Price: 98.827 Stop Loss (SL): 94.093 Take Profit (TP): 108.330 Bullish Flag Pattern Breakout: i have identified a bullish flag pattern, which is a continuation pattern that suggests the resumption of an upward trend. The breakout from this pattern indicates potential bullish momentum in AUD/JPY. By recognizing this pattern, i aim to enter the market in anticipation of the continuation of the upward trend. Entry Point (98.827): i have chosen entry point is at 98.827. This entry price should be determined based on technical analysis, such as the breakout level of the bullish flag pattern or other significant resistance-turned-support levels. Ensure that the entry point aligns with the breakout and provides a favorable risk-to-reward ratio. Stop Loss (94.093): To manage risk, i have set a stop loss at 94.093. The stop loss level is placed below a significant support level or a point that, if breached, would invalidate the bullish scenario. It acts as a protective measure to limit potential losses in case the trade moves against your expectations. Take Profit (108.330): i take profit level is set at 108.330. This level represents your target for closing the trade and taking profits. It should be determined based on resistance levels, Fibonacci extensions, or other technical indicators that suggest potential areas where the price might encounter selling pressure or reach a significant target. Remember to continually monitor price action and adjust your trade management as market conditions evolve. Consider factors such as economic data releases, geopolitical events, and changes in market sentiment that may impact the AUD/JPY pair. It is essential to conduct thorough analysis, implement proper risk management strategies, and adhere to your trading plan. Trading involves inherent risks, and it is crucial to stay disciplined and adapt to changing market dynamics.
Long
by Jazzy_Qmolautsi
7 Expert Risk Management Techniques for TradingRisk management refers to the techniques used to identify, evaluate, and mitigate the potential risks associated with trading and investing. Whether you are a day trader, swing trader, or scalper, effective risk management can help you minimize losses and protect your hard earned money all while maximizing potential profits. Let's take a look at the top 7 risk management techniques for trading! 👌 Have a Trading Plan Many traders jump into the market without a thorough understanding of how it works and what it takes to be successful. You should have a detailed trading plan in place before making any trades. A well-designed trading plan is an essential tool for effective risk management. A trading plan acts as a roadmap, laying out a set of guidelines/rules that can help traders avoid impulsive decisions. It is crucial because it requires you to think deeply about your approach before you begin risking real money. Having a plan can help you stay calm under stress as your plan will have specific steps to take for anything the market throws at you. It is essential to clearly define your trading goals and objectives. Are you aiming for short-term gains or long-term wealth generation? Are you focused on a specific asset class or trading strategy? Setting specific and measurable goals helps you stay focused and evaluate your progress. Another important part is to describe the trading strategy you will employ to enter and exit trades. This includes the types of analysis you will employ (technical, fundamental, or a combination), indicators or patterns you will rely on, and any specific rules for trade execution. Determine your risk tolerance, set appropriate position sizing rules, and establish stop-loss levels to limit potential losses. The Risk/reward ratio When you are planning to open a trade, you should analyze beforehand how much money you are risking in that particular trade and what the expected positive outcome is. Here is a useful chart with some examples to understand this concept: As you can see from the data above, a trader with a higher RR (risk-reward ratio) and a low win rate can still be profitable. Let’s examine this a little more by looking at a profitable example with a 20% success rate, a RR ratio of 1:5, and capital of $500. In this example, you would have 1 winning trade with a profit of $500. The losses on the other 4 trades would be a total of $400. So the profit would be $100. An unprofitable RR ratio would be to risk, for example, $500 with a success rate of 20% and a risk/reward ratio of 1:1. That is, only 1 out of 5 trades would be successful. So you would make $100 in 1 winning trade but in the other 4 you would have lost a total of -$400. As a trader, you need to find the perfect balance between how much money you’re willing to risk, the profits you’ll attempt to make, and the losses you’ll accept. This is not an easy task, but it is the foundation of risk management and the Long & Short Position Tools are essential. You can use our 'Long Position' and 'Short Position' drawing tools in the Forecasting and measurement tools to determine this ratio. Stop Loss/Take Profit orders Stop Loss and Take Profit work differently depending on whether you are a day trader, swing trader or long term trader and the type of asset. The most important thing is not to deviate from your strategy as long as you have a good trading strategy. For example, one of the biggest mistakes here is to change your stop loss thinking that the losses will recover... and often they never do. The same thing happens with take profits, you may see that the asset is "going to the moon" and you decide to modify your take profit, but the thing about markets is that there are moments of overvaluation and then the price moves sharply against the last trend. There is an alternative strategy to this, which is to use exit partials, that is closing half of your position in order to reduce the risk of your losses, or to take some profits during an outstanding run. Also remember that each asset has a different volatility, so while a stop loss of -3% is normal for a swing trading move in one asset, in other more volatile assets the stop loss would be -10%. You do not want to get caught in the middle of a regular price movement. Finally, you can use a trailing stop, which essentially secures some profits while still having the potential to capture better performance. Trade with TP, SL and Trailing Stop Selection of Assets and Time intervals Choosing the right assets involves careful consideration of various factors such as accessibility, liquidity, volatility, correlation, and your preference in terms of time zones and expertise. Each asset possesses distinct characteristics and behaviors, and understanding these nuances is vital. It is essential to conduct thorough research and analysis to identify assets that align with your trading strategy and risk appetite. Equally important is selecting the appropriate time intervals for your trading. Time intervals refer to the duration of your trades, which can span from short-term intraday trades to long-term investments. Each time interval has its own advantages and disadvantages, depending on your trading style and objectives. Shorter time intervals, such as minutes or hours, are often associated with more frequent trades and higher volatility. Traders who prefer these intervals are typically looking to capitalize on short-term price fluctuations and execute quick trades. Conversely, longer time intervals, such as days, weeks, or months, prove more suitable for investors and swing traders aiming to capture broader market trends and significant price movements. Take into account factors such as your time availability for trading, risk tolerance, and preferred analysis methods. Technical traders often utilize shorter time intervals, focusing on charts, indicators, and patterns, while fundamental investors may opt for longer intervals to account for macroeconomic trends and company fundamentals. For example, If you are a swing trader with a low knack for volatility, then you can trade in assets such as stocks or Gold and ditch highly volatile assets such as crypto. Remember that there is no one-size-fits-all approach, and your choices should align with your trading style, goals, and risk management strategy. Here is a chart of Tesla from the perspective of a day trader, a swing trader, and an investor: Backtesting Backtesting plays a crucial role in risk management by enabling traders to assess the effectiveness of their trading strategies using historical market data. It involves the application of predefined rules and indicators to past price data, allowing traders to simulate how their trading strategies would have performed in the past. During the backtesting process, traders analyze various performance metrics of their strategies, such as profitability, risk-adjusted returns, drawdowns, and win rates. This analysis helps identify the strengths and weaknesses of the strategies, allowing traders to refine them and make necessary adjustments based on the insights gained from the backtesting results. The primary objective of backtesting is to evaluate the profitability and feasibility of a trading strategy before implementing it in live market conditions. By utilizing historical data, traders can gain valuable insights into the potential risks and rewards associated with their strategies, enabling them to manage their risk accordingly. However, it's important to note the limitations of backtesting. While historical data provides valuable information, it cannot guarantee future performance, as market conditions are subject to change. Market dynamics, liquidity, and unforeseen events can significantly impact the actual performance of a strategy. There are plenty of ways to backtest a strategy. You can run a manual test using Bar Replay to trade historical market events or Paper Trading to trade real examples. Those with coding skills can create a strategy using Pine Script and run automated tests on TradingView. Here is an example of the Moving Averages Crossover strategy using Pine Script: Margin allocation We are not fortune tellers, so we cannot predict how assets will be affected by sudden major events. If the worst happens to us and we have all of our capital in a particular trade, the game is over. There are classic rules such as the maximum allocation percentage of 1% per trade (e.g. in a $20,000 portfolio this means that it cannot be risked +$200 per trade). This can vary depending on your trading strategy, but it will definitely help you manage the risk in your portfolio. Diversification and hedging It is very important not to put all your eggs in one basket. Something you learn over the years in the financial markets is that the unexpected can always happen. Yes, you can make +1000% in one particular trade, but then you can lose everything in the next trade. One way to avoid the cold sweats of panic is to diversify and hedge. Some stock traders buy commodities that are negatively correlated with stocks, others have a portfolio of +30 stocks from different sectors with bonds and hedge their stocks during downtrends, others buy an ETF of the S&P 500 and the top 10 market cap cryptos... There are unlimited possible combinations when diversifying your portfolio. At the end of the day, the most important thing to understand is that you need to protect your capital and using the assets available to you a trader can hedge and/or diversify to avoid letting one trade ruin an entire portfolio. Thank you for reading this idea on risk management! We hope it helps new traders plan and prepare for the long run. If you're an expert trader, we hope this was a reminder about the basics. Join the conversation and leave your comments below with your favorite risk management technique! 🙌 - TradingView Team
Editors' picks
Education
by TradingView
64
Three Effective Commodity CFD Trading Strategies Whether you're a seasoned trader or new to the world of commodities, understanding the various strategies that are available may play an important role in building a successful trading plan. In this article, we’ll explain three types of commodity CFD trading strategies and provide examples of each that you could get started with today. Commodity Trading Explained Commodity trading refers to the buying and selling of raw materials and industrial components in the financial markets. While Forex trading deals with currencies, commodities trading primarily deals with physical goods. Typically, commodities fall into four broad categories: energy, metals, agriculture, and livestock and meat. There are many reasons why people trade commodities. Some trade them as a way of hedging against inflation; this is particularly true of precious metals. Others might use them to take advantage of a booming economy, as demand for energy, metal, and food usually increases in times of economic growth. Commodities trading is a practice that dates back thousands of years. In the past, early civilisations had to buy and store these goods physically, but nowadays, there are many types of commodity trading available. In the 21st century, traders don’t need to buy and store goods; they can trade them as a contract for differences (CFDs). More about commodity CFD trading can be found on FXOpen. Also, traders can gain exposure to commodities through stock and exchange-traded fund CFDs, which you’ll also find on our platform. 3 Examples of Commodity CFD Trading Systems Broadly speaking, commodities CFD trading strategies can be divided into two categories: fundamental, based on economic factors and news, and technical, based on past price movements and market trends. We’ll be looking at three technical strategies. If you’d like to follow along, you can use a risk-free demo account. Please note that given the wide spreads usually seen in commodities, it’s preferable to use at least 15-minute charts. 1. Trading Breakouts A breakout refers to the rapid price movements seen after an area of support or resistance is broken. However, breakout trading may be harder than it seems. A “fakeout” - a move beyond a support or resistance level that quickly reverses - may trap traders and put them in the red. Therefore, some traders prefer to wait for confirmation and enter with a stop-limit order. - Entry: Once an area of support or resistance has formed (A), price needs to break through and create a swing high or low (1). When the price returns to the level, an opposing high or low should form (2). Then, you may set a stop limit order at the previous high or low (1) to catch the confirmed breakout. - Stop Loss: The strategy suggests setting a stop above the swing high or low that creates the retest. - Take Profit: Traders may take profit at a level that gives them a 2:1 risk/reward ratio. Some prefer to trail their stop, while others might move it to breakeven and manually take profits at future areas of support and resistance. 2. Trading Trends Trend-following strategies have a potential to do well with commodities, given that their trends can last weeks, months, or even years. This specific strategy uses moving averages to confirm the direction of the trend with additional confluence from the Relative Strength Index (RSI). - Indicators: RSI (14), Exponential Moving Average (EMA) of 21 (grey) and 50 (orange). - Long Entry: When EMA 21 crosses above EMA 50 and RSI is above 50 (showing bullishness), the first retest of EMA 21 may be considered an entry point (2). - Short Entry: When EMA 21 crosses below EMA 50 and RSI is below 50 (showing bearishness), you may enter on the first retest of EMA 21 (1). - Stop Loss: For longs, you could set a stop just below EMA 50 and trail as the moving average moves up. For shorts, you could set a stop just above EMA 50 and trail as the moving average moves down. - Take Profit: Traders usually start taking profits at a level that gives them a 2:1 reward/ratio. Alternatively, you might take profits when RSI dips below 50 for a long trade or above 50 for a short trade. Trading Ranges While commodities can be highly volatile, like other assets, they also experience ranges. Range trading is another type of planning and trading of commodities. The use of volatility-based indicators, like Bollinger Bands, alongside an indicator that tells you whether price is trending or ranging, like the Average Directional Index (ADX), may be helpful when trading ranges in commodities. - Indicators: Bollinger Bands (20, 2), ADX (14, 14). - Entry: The theory suggests a trader goes long when ADX is below 20 and the price touches the lower Bollinger Band and goes short when ADX is below 20 but the price touches the upper band. - Stop Loss: There are a couple of ways to set a stop loss here. One way might be to use a set number of pips, or perhaps roughly half the size of the entry candle. Alternatively, a trader could set a standard deviation of the Bollinger Bands to 3 and use the newly-formed bands as a stop. - Take Profit: Since this is a range trading strategy, it’s expected that positions are closed on touching the opposing band, but a trader can choose to leave some in and move their stop at breakeven to potentially be involved when the range breaks out. Ready to Start Your Commodities CFD Trading Journey? Now that you have three potential strategies under your belt, you may start thinking about your next steps. If you’re thinking of testing these strategies on a live market, you may try the TickTrader platform. You’ll have the chance to gain valuable experience with these strategies and see what works best for you.
FXOPEN:XAUUSDEducation
by FXOpen
3 Types of Stop LossesToday’s topic is going to be on three types of stop losses . This is a very critical topic because stop losses come under the category of risk management. Risk management is such a pivotal, important and critical topic. Why? Because professional traders and investors, the first thing that they always do and constantly think about before they get into a trade or investment is not how much profit they’re going to make, it’s how much they can afford to lose. The only control that you have when you enter into a trade and you’re in the trade is the risk factor because most of us will not have the capital power to control that trade. It’s a collective pool of people’s thoughts and a lot of other factors that come in which then determines how the price moves in the market, especially how smart money enters the market actually. So in light of all of that, the real power that you have, the real control that you have is your risk management. How much you can afford to lose. In terms of that, we’re going to be looking at the three types of stop losses and how to stop your loss when the market does something which is not favourable to you and not in line with the direction of the trade that you are taking on. The first type is what we call the technical stop . This is the one most people will be familiar with. That’s where all your different kinds of stop losses come under: moving averages, channels, trend lines and so forth. All these are summarised under technical stop losses. Even if you use tier based stop losses, they come under technical stop losses. The second one is called a money stop . A money stop is basically one where you write in your rules, and this is how you execute a trade as well is that you say, for example, you enter a trade and it is going well in profit. You tell yourself to trail your stop loss to break even as soon as the trade is 3% in profit. You don’t care what the moving averages are or where the price pattern is whatsoever, you would just move your stop loss to break even. So that is purely based on money. That is called a money stop because the stop loss is adjusted according to your profits or your losses. Usually it’s to your profits – that’s when you trail and adjust your stop loss. The final one is the time stop . As you’ve already guessed, the time stop is based on time. Especially for intra-day trading it’s very important because you know certain times of the day volume is really high and other times of the day volume starts to dry up. So especially if you want to capture a certain percentage of move, you want to capture it before a certain time and you usually know that after 5pm or 6pm the volume usually dries up. Price movement is not really that much especially towards 9pm. So you can have a rule saying, for example, at 5pm or 6pm you’ll look at exiting a trade if it’s not reached an objective. If you’re a swing trader you start saying things like you know if it’s consolidating for 10-15 days in a row I will possibly exit out of the trade. So all that is basically based on time. Let me ask you a question. Out of all the three stops I’ve talked about: technical, money and time, what do you think is the strongest stop of them all? I think, if my guess is right as we have coached thousands of traders, most of them usually tell me it’s either the technical or the money stop. In fact, let me tell you Traders, the weakest one of them all is the money stop because there’s no basis for it. It’s just based on money and just trailing it. The strongest is the time stop because everything is determined on time and you’re time bound in everything that you do. If you look at daily activities: waking up, going to work, having meals, going to bed – your life is time bound. Here’s the final most critical point. If you actually want to make your risk management really strong, the trick is not to put emphasis on either one of them according to strength, but to make them sync with each other so that they can then adapt to market conditions. It’s basically a confluence of the types of stop losses that can help you to generate the rules which can adapt to market conditions. For example, when you start out if you put in your initial stop loss in a technical place and as time then moves by then you would then get more aggressive with your stop loss and as it’s nearing towards exit, if you’ve reached a certain profit potential as the market price is still hovering around, losing momentum, then you would then start to go into money stop. Money stop is especially useful if you’re in swing trading. For example, when we took the DOW Jones trade and we took that 2,000 point move on a mismatched strategy when it had already done 80% of the move we used a money stop because we don’t want to give back all that profit back to the market. So that’s when we start to us a money stop and a combination of time stop, initially starting with a technical. So that’s how you do it. Do have a good think about this because this is so critical Traders. If there’s only one thing you have total control of, it’s your stop loss, it’s your risk management. So contemplate this, revisit your strategy rules and see how you can optimise that for maximum performance of your strategy. I believe that you have really enjoyed this topic and have some amazing value from this. Until the next time, as we always say, stay disciplined, follow your trading plan and keep trading like a master .
Education
by masterthemarkets2010
Securing Trades: Moving Stop Losses to Breakeven Forex TradersProfitability is the ultimate goal for all traders in the forex market. However, evaluating profitability is not a straightforward task. While many traders rely on comparing the size of their losses to their profits, this single metric alone may not provide enough motivation or a comprehensive understanding of one's success. In fact, solely fixating on this indicator can sometimes trap us in psychological pitfalls. When faced with a series of unsuccessful trades and accumulating losses, the desire to recoup those losses and attain profits can become overpowering. This intense longing often drives traders to take unnecessary risks and make impulsive trading decisions, driven solely by the emotional need to recover their losses. Unfortunately, succumbing to such emotional pressures typically leads to even greater losses, further intensifying the emotional turmoil associated with trading. To mitigate the emotional tension and prevent impulsive decision-making, one effective strategy is to employ a technique known as moving the Stop Loss to breakeven. This technique involves adjusting the Stop Loss level to the trade's entry price once a certain profit threshold has been reached. By doing so, traders can secure their initial investment and eliminate the risk of incurring any further capital losses. Moving the Stop Loss to breakeven serves multiple purposes. First and foremost, it reduces the emotional pressure that traders experience when managing their trades. By eliminating the possibility of incurring additional losses, traders can approach the market with a clearer and more objective mindset. This, in turn, helps to curb emotional biases and impulsive decision-making, which often lead to detrimental outcomes. Furthermore, moving the Stop Loss to breakeven can provide a sense of psychological relief and instill greater confidence in one's trading strategy. Traders can take solace in the knowledge that even if the trade eventually turns against them, they will not suffer any financial loss. This fosters a more disciplined and strategic approach to trading, as the fear of losing capital is significantly reduced. Implementing the practice of moving the Stop Loss to breakeven is ultimately a risk management technique aimed at safeguarding traders' capital and minimizing emotional stress. By adopting this strategy, traders can achieve a higher level of psychological stability and make more rational trading decisions. While it does not guarantee profitability on its own, it serves as an invaluable tool in maintaining a balanced and disciplined approach to navigating the forex market. What Is Breakeven To comprehend the concept of breakeven, let's delve into an illustrative example. Consider two scenarios where we analyze the market and identify an ascending channel. We wait for a test of the upper boundary and observe a bearish absorption reversal pattern, prompting us to sell EUR/USD with targets near the lower boundary of the channel. In the first situation, our short position initially brings a profit of approximately 15-20 pips, and our profit expectations rise. However, instead of continuing in our favor, the price abruptly reverses and triggers the Stop Loss order. As a result, a position that had shown a small profit closes with a loss. At the moment when the price reaches 15-20 pips, which accounts for more than half of the anticipated distance from the order opening point to the Take Profit level, we make a strategic move. We adjust the Stop Loss level below the opening price, effectively securing our position from further loss. The subsequent price movement can unfold in two possible ways: 1) The price continues its descent and reaches the Take Profit level, resulting in a profitable outcome for our position. 2) The price reverses direction and triggers the Stop Loss order. However, since we had moved the Stop Loss to breakeven, the position is closed not at a loss but at a breakeven point, meaning we exit the trade without suffering any financial loss. Based on the given example, we can define the concept of breakeven as follows: Breakeven level refers to the adjustment of the Stop Loss order of an open trade to a profitable area. The objective of implementing this strategy is to exclude potential losses in the current trade, effectively safeguarding our capital. By moving the Stop Loss to breakeven, we ensure that even if the trade turns against us, we exit the position without incurring any financial loss. The Psychology Of Breakeven On Forex The success of traders is influenced by various factors, with trading strategies and money management accounting for 10% and 20% of the equation, respectively. However, a significant portion of success, 70% to be precise, stems from psychology and emotional balance. Therefore, trading is primarily a journey of self-improvement and self-discipline. In this context, breakeven can serve as a stabilizer or a source of calmness, and each trader must decide for themselves whether it aligns with their trading approach. Traders who neglect moving their Stop Loss to breakeven often do so out of a desire to "beat" the market in a particular situation, disregarding risk management principles. They forget that each trade is merely an opportunity to generate profit and that a trader's success hinges on the cumulative outcome of all their actions. By moving the Stop Loss to the breakeven level, traders ensure that their trading account is not exposed to unnecessary risk. This approach allows them to step back temporarily, preserving their capital, and return to trade another day. Breakeven becomes especially valuable when a trade accumulates substantial floating profits. It acts as a safeguard, protecting capital and preventing the unfortunate scenario of a winning trade turning into a losing one. However, it's crucial to note that utilizing the breakeven level requires proper understanding and application. Emotional traders may be tempted to move their Stop Loss to breakeven prematurely, resulting in a high number of breakeven trades. Therefore, it is essential to thoroughly study this tool and evaluate how it can be effectively integrated into your trading strategy. In general, if your next trade concludes without a significant profit or loss, it may be wise to take a break and rest. Achieving a result close to breakeven or closing a trade at breakeven can be viewed as a positive outcome in the long run, contributing to overall trading success. Why Do Traders Move Stop Loss To Breakeven? There are several reasons why traders opt for a breakeven stop in their trading: Psychological Comfort: Moving a trade to breakeven provides a sense of comfort and security. By eliminating the possibility of a loss, traders can view the trade as a risk-free profit. It reduces the emotional stress associated with potential losses and allows traders to stay in the trade with a peace of mind. 1) Expert Opinion: Many experts in the field of technical analysis advocate for protecting earned profits, and a breakeven stop is often recommended for this purpose. By locking in profits, traders can avoid the disappointment of seeing a profitable trade turn into a loss. This helps maintain discipline in following the trading plan and preserves the expected outcome of the strategy. 2) Greed and Fear: Some traders move their trades to breakeven as soon as they have a small profit, driven by greed and fear. They fear losing the profits they have already gained and hope to capture even more gains. However, this approach can backfire if the market retraces and stops the trade out at breakeven, only to continue moving in the desired direction. Fear and greed can cloud judgment and lead to impulsive decisions. Building confidence in both the trading strategy and oneself is essential to overcome these emotions and stick to the trading plan. 3 )To build confidence in the strategy, traders should thoroughly test it on historical data for an extended period. If the strategy demonstrates consistent positive results over several months, the trader can have faith in its effectiveness. Building self-confidence requires a holistic approach, which may include activities like meditation, exercise, and self-reflection. In conclusion, utilizing a breakeven stop can provide psychological comfort, align with expert advice on protecting profits, and help manage the emotions of greed and fear. However, it is essential to understand and apply this technique in the context of a well-tested and proven trading strategy, while also working on building self-confidence. How Do I Correctly Set A Breakeven Level? Moving the trade to breakeven is a decision that should be made with careful consideration. Rushing to set breakeven as soon as the price surpasses a certain number of points from the opening level can lead to premature trade closure and missed profit opportunities. It's crucial to set the breakeven level correctly and at the right time. There are certain scenarios where moving the trade to breakeven is appropriate: 1) According to the rules of your trading system: The decision to move the trade to breakeven should be planned and integrated into your trading system. This ensures consistency in your approach and prevents impulsive decisions based on emotions. 2) When events deviate from your trading scenario: If the price doesn't unfold as expected, such as in cases of flat-lining or lack of momentum, moving the trade to breakeven can be considered. However, it's important to factor in the time element. If you entered a trade during a period of low market activity, such as between sessions, it's advisable to allow more time for the price to develop before making any adjustments. 3) Allowing for price volatility and maneuverability: It's not necessary to move the trade to breakeven immediately after it becomes profitable. Price movements can be erratic, and giving the trade some room to breathe and maneuver within a reasonable range can help avoid premature stop-outs. The decision on when to move the Stop Loss to breakeven level is subjective and depends on various factors, such as the volatility of the currency pair, the timeframe being traded, and the trader's individual preferences. Traders often use technical tools like Fibonacci retracement, fractals, pivot levels, or other indicators to help determine appropriate breakeven levels. Ultimately, finding the right balance between protecting profits and allowing for potential gains requires experience, practice, and continuous refinement of your trading approach. Disadvantages Of Using Breakeven: While applying breakeven can offer certain advantages, it's important to acknowledge the potential disadvantages as well: 1) Impact on mathematical expectation: Triggering breakevens too frequently can negatively impact the overall mathematical expectation of winning trades. Each time a breakeven is triggered, it reduces the potential profit and increases the breakeven rate, which can erode profitability over time. Traders need to carefully consider the balance between protecting profits and allowing trades to run for maximum potential gains. 2) Effect on trading statement: If a trader consistently closes positions at breakeven, it can impact the overall trading statement. This becomes significant when traders showcase their results to potential investors or when assessing their own performance. A high number of breakevens may give the impression that the trader is risk-averse or lacks confidence in their trades. It's important to strike a balance between breakevens and profitable trades to maintain a positive perception. 3) Comparison with initial stop loss: Statistically, breakevens are triggered more frequently than initial stop losses. Some traders choose to close a portion of their position at a profit level equal to the initial stop loss level. This approach allows them to secure some profit while letting the remaining portion of the trade run for potential further gains. By doing so, they aim to strike a balance between locking in profits and giving trades room to develop. Ultimately, the decision to apply breakeven or its variations should be based on careful analysis of individual trading strategies, risk tolerance, and desired trade outcomes. Traders should consider both the advantages and disadvantages to make informed decisions that align with their overall trading goals. Trailing Stop: In addition to the standard breakeven closure, another option to consider is the trailing stop. This order type allows the stop loss to automatically trail the price at a certain distance as it moves in your favor. To set a trailing stop, you can right-click on the open position and specify the trailing stop size in points. Here's how it works: Let's say you've bought the EUR/USD pair at 1.1000 and set a trailing stop of 50 points. As the price moves in your direction, reaching 1.1100 and giving you a profit of +100 pips, the trailing stop will also adjust accordingly. If the price retraces by 50 pips to 1.1050, your position will be closed with a profit of +50 pips. This type of order is particularly useful for medium-term trading or during large market movements when it's uncertain when the trend might end. When used correctly, the trailing stop allows you to capture maximum profit from an open position. However, it's important not to set the trailing stop too tightly in volatile instruments to avoid premature closing of the position based on minor price fluctuations. Trailing stops offer flexibility and the potential to lock in profits as the price moves in your favor. They can be a valuable tool for managing trades and protecting gains, especially in trending markets. Traders should consider their trading style, risk tolerance, and market conditions when deciding whether to use a trailing stop and how to set the appropriate distance to maximize potential profits. Conclusion. n summary, one of the primary goals for traders is to avoid incurring losses. The concept of breakeven is rooted in this principle, as it allows traders to protect their positions and prevent losses. By moving the stop loss to the breakeven level, traders ensure that even if the trade does not result in a profit, they will not experience a loss either. However, it's important to recognize that breakeven can be a double-edged sword. While it protects traders from losses, it also carries the risk of giving up potential profits. This is because once the stop loss is moved to breakeven, the trade is essentially locked in at a break-even point, and any further upward movement in price will not be captured as profit. Traders need to carefully consider the trade-off between protecting against losses and potentially sacrificing profits when deciding whether to apply breakeven. It ultimately comes down to individual trading strategies, risk tolerance, and market conditions. It's crucial to find the right balance and use breakeven judiciously. Traders should assess the specific circumstances of each trade and make informed decisions based on their analysis and risk management plan. By doing so, traders can navigate the complexities of breakeven and strike a balance between safeguarding their profits and maximizing their trading outcomes.
Education
by FOREXN1
18
SILVER What Next? SELL! My dear followers, Please, find my technical outlook for SILVER below: The instrument tests an important psychological level of 23.2 Bias - Bearish Technical Indicators: Supper Trend gives a precise Bearish signal, while Pivot Point HL predicts price changes and potential reversals in the market. Goal - 22.6 My Stop Loss - 23.42 About Used Indicators: Pivot points are a great way to identify areas of support and resistance, but they work best when combined with other kinds of technical analysis ——————————— WISH YOU ALL LUCK
OANDA:XAGUSDShort
by AnabelSignals
1
❌ The Significance of Stop Loss:Essential for Successful TradingThe Significance of Stop Loss: Essential for Successful Trading and Consistent Profits The majority of seasoned forex traders unanimously emphasize the significance of implementing stop losses in all trading strategies. Unfortunately, beginners and newcomers tend to overlook this essential rule initially, but eventually, they either grasp its importance or cease trading due to consistent losses. Let's delve into the reasons why a stop loss is crucial for achieving successful trading and consistent profits. Understanding Stop Loss In Trading The Stop Loss is a specialized order that serves as a safeguard against trading losses by automatically closing positions when a specific price level is reached. Seasoned traders widely regard the Stop Loss as a pivotal element for successful and profitable trading. This viewpoint is difficult to dispute, especially considering the unfortunate outcomes that often befall beginners who underestimate its importance. Interestingly, even experienced traders, who have achieved remarkable heights in their trading careers, continue to utilize Stop Losses as a testament to their effectiveness. From a technical perspective, a Stop Loss order can be likened to a typical pending order, triggered when the price reaches a predetermined value. However, the crucial distinction lies in the fact that a Stop Loss order closes an existing position rather than opening a new trade, as is the case with a pending order. Undoubtedly, the key advantage of this tool is its automated order closure, eliminating the need for constant monitoring of open positions. Stop orders frequently prove invaluable in mitigating substantial losses when the market behaves unexpectedly. Why Use Stop Loss In Trading A widely recognized trading advice emphasizes the importance of cutting losses in order to allow profits to grow. Many traders have personally experienced the significance of timely closing unprofitable positions. In today's trading landscape, the Stop Loss has become a standard approach for mitigating losses. It is actively incorporated into numerous trading strategies. However, there are some traders who completely dismiss the relevance of this tool and choose not to use it at all. They justify their stance by pointing out instances where prices initially triggered Stop Losses, closed a losing trade, and then abruptly reversed and moved in the desired direction. While it's understandable to consider such viewpoints and frustrations, this argument revolves more around the skill of utilizing the tool, the proximity of Stop Loss levels to price or other critical boundaries, as well as random events that don't reflect systematic negative performance. Given the market's volatility, accurately predicting future outcomes and safeguarding one's position without incurring capital losses is exceedingly challenging. Therefore, it is prudent to err on the side of caution and employ Stop Losses as a form of insurance. Benefits Of Using Stop Loss Unfortunately, many novice traders tend to join the minority and avoid using Stop Losses. This hesitation often stems from the fear of experiencing premature losses. However, any doubts about the usefulness of Stop Losses can be dispelled by considering the following advantages: 1) Limiting losses per trade: The primary advantage lies in the ability to set a predetermined value for the potential loss, thus defining the risk for a specific position. This creates a foundation for effective money management strategies, adding flexibility to trading and safeguarding accounts against excessive drawdowns. 2) Protection against unforeseen events: Traders who actively employ Stop Losses can attest to how this tool has saved their accounts from catastrophic losses during sudden and significant market fluctuations. While opening a trade in the right direction is important, it is equally crucial to protect oneself from unforeseen market situations to prevent substantial losses. Instances where the market swiftly dropped by 50-100 points in a matter of seconds are not uncommon. 3) Stop Losses serve as profit protectors: By being able to limit losses, Stop Losses automatically become mechanisms for securing profits. It is crucial to differentiate this from another commonly used tool in forex and stock markets, known as Take Profit. 4) Psychological factor: The psychological aspect also plays a significant role. Many traders have experienced deep drawdowns where thoughts of financial doom dominate their minds. At such moments, there is often a willingness to spend countless hours in front of the monitor, hoping for the position to return to profitability, even if it's just a few dollars. However, self-confidence alone cannot solve the problem, and the situation continues to deteriorate. As losses accumulate, regret sets in for not closing the order earlier when the losses were smaller. Profitability becomes secondary, and the focus shifts to minimizing losses as much as possible. Instead of closing the unsuccessful position, traders often find themselves waiting for a rebound, exacerbating their losses. To avoid such losses, nervous tension, and emotional exhaustion, all that was needed was the implementation of a Stop Loss. This scenario perfectly illustrates the importance of always using a stop loss. Consider the GBP/USD currency pair, where we plan to enter a trade based on a rebound from the support area marked by the blue rectangle. We decide to take a long position, with an expected profit of $100. However, to manage our risk effectively, we set a stop loss that allows for a maximum loss of $100. Now, let's see what unfolded. The price unexpectedly dropped below our support area, surpassing our predetermined stop loss level. If we had not set the stop loss, the losses could have potentially escalated to a staggering minimum of $700. Can You Trade Without Stop Loss ? To fully grasp the importance of using stop orders and make an informed decision on whether to incorporate them into your trading strategy, it's crucial to understand how neglecting stops can lead to drawdowns: 1) Lost connection: Imagine a scenario where your internet connection suddenly drops, and at that very moment, the market experiences the activity you were anticipating. When the connection is restored, you might find your trade in a significant drawdown, potentially resulting in substantial losses. 2) Unfavorable market development: Sometimes, the market situation evolves in a way that works against the trader's position. In such cases, a properly placed stop loss would automatically close the trade, mitigating the risk of further losses. 3) Ignorance regarding stop loss closing: Some traders refrain from setting a stop loss due to a lack of understanding about when it should be triggered. Consequently, they end up closing the position out of desperation, often incurring losses of 20-40%. This approach leads to a focus on profit fixation, wherein the trader attempts to close other trades that have even minimal profits in order to compensate for losses on losing trades. Ultimately, this only adds more strain and results in new losses. 4) Constant monitoring requirement: Traders without a set stop loss are compelled to remain near their computers at all times to monitor market conditions. This not only leads to inefficient allocation of resources but also creates unnecessary stress and strain. Why Are We Afraid To Accept Losses? Many traders perceive losses as personal insults or signs of incompetence. This approach not only leads to significant stress but also impacts the maintenance of a trading journal. Subconsciously, we tend to equate a trader's journal with a school diary. Just like receiving a "D" grade at school made us hesitant to show the diary to the teacher, we adopt a similar mindset in trading. Conversely, we eagerly anticipate the teacher rewarding us with an "A" grade. However, in trading, there is no teacher to scold us for a "D" grade. Yet, the behavioral pattern remains ingrained, and our subconscious continues to deceive us. We convince ourselves that if there is no "F" grade in the journal, it's as if it doesn't exist, and there won't be any consequences for it. The stop loss is a vital tool that gives traders an edge in the market by allowing them to manage risk effectively. It is essential to approach a losing position with complete acceptance. Whatever has transpired is in the past and cannot be changed. Your focus should be on recording the trade in your trading diary, allowing for future analysis and drawing valuable insights. Remember, prioritizing capital preservation is far more crucial than denying the evident or attempting to prove oneself to the market.
Education
by FOREXN1
3
Importance of a Stop Loss🔴 A stop-loss (SL) is a limit order that specifies how much loss you are willing to take on a trade. It prevents you from making additional losses on a trading position. 🟢 A take-profit (TP) works as the exact opposite of a stop-loss. It specifies the price to close out a position for profit. When you have a take-profit order, the trading platform you are using closes your position automatically when the price level is reached. These tools are beginner friendly and are usually effective for short term trading. The first thing a trader should consider is that the stop loss must be placed at a logical level. This means a level that will both inform the trader when their trade signal is no longer valid, and that actually makes sense in the surrounding market structure. There are several tips on how to exit a trade in the right way. The first one is to let the market hit the predefined stop loss that you placed when you entered the trade. Another method is to exit manually, because the price action has generated a signal against your position. I advise you to use Stop Loss for EVERY trade that you open. Trading without a Stop Loss is a huge risk and it requires specific strategy and experience.
Education
by SanShone
Bharat Forge Ltd. Double BottomA Double Bottom formation has emerged on the Daily chart of Bharat Forge, and the price is currently approaching the neckline of the pattern. The slight upward tilt of the second bottom in the pattern suggests a bullish bias. Furthermore, the 10EMA has crossed above the 50EMA, indicating a potential upward movement. I have placed a buy order at Rs. 802.50, with a Stop Loss set at Rs. 756.53, which corresponds to the bottom of the pattern. With a Risk:Reward ratio of 1:1, the Target Price can be set at Rs. 850.
NSE:BHARATFORGLong
by sudhanshug92
3