In foreign exchange trading, there is a stop loss and a stop profit, which reduces the risk of investors. The short-term trades we make can be said to be speculation, and buy in a good direction. If the market moves in the direction we choose, we will make a profit, otherwise we will lose.
Many short-term traders often forget to set a stop loss in their trading, which may bring a devastating blow to traders, because they often choose to continue holding when facing a losing position. This article will introduce some simple methods to help traders how to set a stop loss.
Focus on stop loss, stop loss is controlled by yourself; do not consider profit, because profit is controlled by the market! You don’t need to look at volatility, let alone pay attention to the disk, because 90% of losses are caused by short-term volatility, and most of the losses come from their subjective predictions of the market. The predictions are effective in simulated trading because the mentality is very stable. , But when trading by yourself, short-term fluctuations will cause great changes in emotions. Watching the market carefully, not only is unnecessary, but the probability of error is greater, because careful observation of the disk will inevitably cause severe psychological fluctuations. , Do a wave of trend, you don’t need to look at the order, just need to look roughly, is it my stop loss. What we need to focus on is to peg the stop loss.
There are stop loss and take profit, but stop profit is generally not used, but there is this concept, and stop loss is more important. It is recommended to set a stop loss for each transaction, which can effectively prevent large losses. Foreign exchange transactions rely on the difference in the price to make money, buy low and sell high.
Now many people are not afraid of losing or winning. On the surface, everyone is afraid of losing, but in essence, everyone is afraid of winning! A loss is very calm and calm. Once you make a profit, you can run faster than anyone else. Only by keeping the roots will the tree expand. It cannot be chopped as soon as it sprouts and used as firewood! Profits can accumulate from small to large, so that your profits can be fully expanded, and the most terrible thing in trading is to make a profit and not insist on it, so that your profit will grow into a big tree. There is no need to pay attention to high and low prices, only the rise and fall.
Once the stop loss point is set in the chart, the next thing you need to do is how to determine the amount of money you can accept in this transaction. Traders can follow the 1% principle, that is, each transaction can only lose 1% of the total funds. Assuming that your total capital is $10,000, you should not allow a loss of more than $100 per transaction.
Similarly, if you trade multiple transactions at the same time, the maximum loss should not exceed 5%. In this case, even if the worst happens and all your positions are stopped, you will only lose 5% of your total funds, that is, you will only lose $500 for $10,000. Although no one wants to lose this $500, but at least you can still keep $9,500 in the most unfavorable situation in the market to reserve capital for your subsequent transactions.
Foreign exchange stop loss-percentage principle
The essence of trading is to deal with what is happening, not what is going to happen. We should focus our energy on dealing with what is happening instead of making unnecessary predictions about the future, because no one will know what will happen. Therefore, there is no need to think about what the future will be. It is enough to know what you should do now. We can’t control the rise and fall of prices, and we can’t control the future. For this kind of thing, we can only give up. People are always “kind”, and “kind” people will lose money. The long position has already made a lot of profit and should take a little bit, or the short position has already lost a lot and can go short. And this kind of mentality of ours will inevitably plunge our own transactions into a quagmire, and we will continue to guess the top and bottom. Once a trend has formed, we will often leave the opponent’s kill. Be sure to let your trading system tell you how to do it. Don’t rely on instinct to operate, don’t rely on your own analysis and thinking to do transactions. Your analysis and thinking are only your own, because the information you have is limited, so consider What is the value of this kind of analysis and thinking, and you can only make a profit if you do it according to your own system, your own discipline, and your own principles!
The foreign exchange market is a very peculiar market. It is a collision of concentrated interests. You must have your own principles and methods. If you must have someone tell you that it will fall or rise tomorrow, you should not trade at all. If the market gives you a signal that contradicts the information you get, it can only mean that the information you get has no value. We need to keep an eye on the current price and our own stop loss.
Comment on a good trading system will have very clear trading signals! Stop loss is limited to the risk that you can bear, leading to the problem of fund management! Different trading methods and investment concepts have different settings for stop loss, but after all, stop loss is an indispensable procedure throughout the transaction. When the profit of a position is understood, stop loss becomes a stop loss. The essence is the same. The purpose of the stop loss is to limit the loss to a small amount and allow the profit to fully grow, so the stop loss must also be constantly moving, so as to maintain the vested profit. A point suitable for trading must first be a point convenient for stopping loss! A good trading system must be integrated with investment philosophy and trading skills to form a trading belief. Trading with beliefs makes various disciplines and trading rules a trading habit!