How to avoid the loss of funds in the transaction?Regardless of experience, every trader needs a plan. The key factors that can help the transaction become safer, they are the necessary strategic minimum requirements to ensure stable income and avoid unpredictable losses.
Why Do Traders Fail?
Let's take a look at the top reasons why traders lose money:
Trading is a complex process. Trading strategies require discipline and precision. Even with the best ideas, some traders can forget to act systematically.
Traders can be reckless. They give up doing market analysis, don't bother with stop loss orders, and forget about the rules of risk management. These all lead to mistakes and bad deals.
So how to avoid the loss of funds in the transaction?
1 Don't build positions with huge volume
If you are unsure of market movements, focus on at most one or two trades in a session. In the case of a small order volume, it is more controllable to track and find out various opportunities.
Please note that some factors, such as slippage (the difference between the expected price of the order and the actual execution price of the order), are unsolvable and cannot be considered in advance before the transaction is opened).
2Using Stop Loss and Take Profit
To reduce the risk of losing your money, you can use a stop loss order. They protect you from losing more money than you can afford. As for take profit, the principle is similar -- it will automatically close the order when the price target is reached, thereby locking in the profit. Therefore, taking profit will help you get out of the market immediately when the market price is right, so as to maximize your profits.
3Use reasonable leverage
By setting a wider and reasonable stop loss, smaller leverage will allow each trade to have more breathing room, thereby avoiding higher capital losses. High leverage will blow up your trading account faster when the market trend goes against your expectations, because a larger lot size will make you face higher losses.
4. Pay attention to important news
The market can change its trend at any time due to news or even rumors. Staying informed is key. All traders need to follow up all kinds of news throughout the trading hours. Let's say you realize that a news release will affect the direction of your position, but you're not sure which direction it will be. In such cases, you should provide maximum protection for the position you open (set stop loss, take profit, and in extreme cases, close the position before the release of the expected news).
5 Don’t Trade During Low Liquidity Hours
You need to be aware that illiquid trading instruments tend to have wider bid-ask spreads, higher volatility and, thus, higher risk for the trader. Therefore, trading in a cycle with little liquidity will face the possibility of high capital losses.
6 View multiple metrics
It is best to make your long/short decision based on several technical indicators. Indicators and other tools in technical analysis need to corroborate each other. Combine two or three different types of indicators. Your trading strategy can also rely on candlestick and trend chart patterns, as well as the use of golden section tools. In this way, the system will provide you with signals with a high probability of success. If you use such a strategy, combined with a stop loss and the correct risk/reward ratio, then you can avoid losing money in your trades.
7 Control Your Emotions
The most successful trading comes from confidence and calm. Your fear of losing money, or your desire to make money with your trading instruments in the precarious state of big news, can get in the way. Make sure you keep your emotions in check and use tools like stop loss and take profit orders to make objective trading decisions.
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