We often say that in love, smart women know how to stop loss in time, and those who don’t have the awareness of stop loss in time, or don’t know how to stop loss, will only hurt themselves in the end. The same is true in the foreign exchange market. Stop loss is very important, and it is also important to master the skills of setting stop loss. Today, we will start with the simplest “fund stop loss”.
Funding stop loss is also called proportional stop loss because it uses a certain trading account ratio, such as “2% of the account”, which refers to the ratio that traders are willing to take risks. Different traders have different risk ratios-more aggressive traders will risk up to 10% of the account amount, while less aggressive ones are usually only willing to risk less than 2% of the total account amount per transaction. Once the risk ratio is determined, traders will use their position size to calculate how far their stop loss is from the entry point.
Traders should set a stop loss according to the market environment and system rules, not the amount of stop loss you want.
How to avoid premature stop loss in foreign exchange trading?
Foreign exchange traders often predict market conditions before establishing a position and then set a stop loss level. However, the foreign exchange market is changing rapidly and the market is ups and downs. Traders will be “eliminated out” prematurely if they are not careful.
For ordinary traders, it is necessary to reset the stop loss level in time before the market conditions are unfavorable to them to avoid potential capital losses. However, some experienced trading masters tend to have more confidence in their positions and are well acquainted with market dynamics and fundamental analysis. They believe that the market will eventually improve after a short-term disadvantage to them. For these trading masters That said, you can appropriately reduce the stop loss level.
So, how to avoid premature stop loss in foreign exchange trading?
There are many ways to stop loss, such as fixed price stop loss, technical indicator stop loss, psychological price stop loss, and fixed capital ratio stop loss based on fund management, etc., all of which are beneficial to limit the loss to a certain range .
Here, I will mainly introduce you to the trailing stop, which is also called trailing stop, which is an excellent stop loss strategy. Specifically, it refers to setting a stop loss of a certain number of points following the latest price, which is only triggered when the exchange rate changes in the favorable direction of the position. It is an instruction set when entering the profit phase. Therefore, trailing stop loss is a very good trading tool, especially in the case of large price fluctuations, which can guarantee profit. Some mainstream platforms currently on the market, such as MT4, have this function.
In the actual trading process, everything you want and know is one. In the trading system or trading strategy, if there are conflicting elements, it will inevitably affect your entire trading performance, so everything must be suitable for it to be completely consistent. One! With the accumulation of experience and the deepening of cognition, you will naturally have your own set of stop loss plans.
The person asking this question is nothing more than trying to figure out “how to establish the stop loss point?” However, this question has no answer. If there is an answer, there are thousands of answers.
Every trader will form his own unique trading thinking in the process of groping and learning. Some people think that a stop loss should be set near some support and resistance levels, some people think that a very wide stop loss should be set, and some people think that a very wide stop loss should be set. It is believed that stop loss is only set when a major event occurs in the market. Generally, it is manual stop loss. Everyone has different thinking, but this does not prevent traders from making money.
However, in reality, among some traders, there are really masters who do not set a stop loss, but he will make some hedging orders, and at the same time, the positions are controlled in a small range. The current profit effect is very satisfactory.
Again, the best fit is the best! Perhaps this sentence is one of the most classic quotes in the trading world so far.
Therefore, the stop loss is to use the nunchaku. If you control it, it is your weapon. If you can’t control it, it will become your self-harm tool!
Fluctuation point stop loss method
This is the most suitable stop loss strategy used in strong trend markets with obvious volatility points.
When using the trend fluctuation point to set a trailing stop loss, the trader can make the best use of the trend to make profits until the trend ends and moves in the opposite direction.
Traders must first keep a close eye on the market, stop loss in time, and then improve the stop loss level when it is guaranteed that there is no loss, to avoid premature stop loss, and effectively lock in profits. To stop the loss in time, traders should set the stop loss in time when the market turns. For some experienced trading masters, you can appropriately reduce the stop loss level.
The essence of avoiding premature stop loss is to grasp the timing of the market trend. As long as the trader can accurately predict the time of market trend change and set a basically accurate stop loss level, there will be no premature stop loss. In foreign exchange trading, setting a good stop loss level is as important as establishing a position.