Investors in foreign exchange trading usually decide to enter the market because of the judgment of a certain direction in the market, especially at certain key prices. Whether a breakthrough will become the focus of market controversy, the market is full of disputes about whether the breakthrough can be achieved and the trend development, not to mention that it will Unexpected breakthrough events may change the development pattern of the entire market, which is exactly where the uncertainty of the market lies.
In this case, the choice made by the investor cannot be determined to be correct. In order to prevent any accidents, it is necessary to set a stop loss and try to minimize their own losses. Because breakthroughs in important levels and the occurrence of important emergencies will often cause huge shocks concurrently, driving market funds to flow quickly in one direction, and the exchange rate may rise sharply or fall sharply. If the direction is wrong, the loss is not stopped. , The loss will be very heavy.
What to do about losses in foreign exchange speculation
No one can guarantee that every transaction is 100% correct, so when the transaction judgment is wrong and the trend is irreversible, you can limit the amount of money lost through the stop loss function and correct your mistakes in a timely and effective manner.
Through the analysis of the exchange rate operation pattern, once the exchange rate is found to be broken, then resolutely stop the loss. In actual combat, investors should also pay attention to flying knives in the air after stopping the loss. After the downward trend of exchange rate is established, they should hold their money bags tightly, and grab the rebound in the downward trend, like a knife licking blood and taking copper money from the fire. In particular, the immeasurable and small staggered decline of Yin and Yang makes investors often have the illusion of stopping the decline, so that the wrong answer will stop the loss early.
Setting a proper stop loss level is essential in foreign exchange speculation
- Stop loss after being broken through key support or resistance levels
This is an operating mode often used in actual combat. According to the editor’s observation, investors have a high percentage of stop-loss outs here. However, a careful analysis of the foreign exchange trend chart reveals that in the foreign exchange market, there is often a form of price trend reversal after the resistance or support position is broken.
Important resistance or support positions are as follows: price highs or lows in a longer time frame; positions provided by trend lines, golden section, or moving average systems, etc.
The main reasons for the lack of reliability of these positions are: the support or resistance positions provided by the trend line, the moving average system, and the golden section are inherently subjective, lacking a reliable basis and foundation, and the accuracy rate is very low. Positioning a stop loss point is like a dead end.
- Stop loss after the absolute amount of loss is reached
At present, this is the stop loss method adopted by more foreign exchange traders in foreign countries. The main point of operation is that the maximum loss of funds for setting up an entry position is generally 5%-20% of the funds occupied, or it can be the absolute amount of funds occupied, for example, 50 points per lot is 500 US dollars. Once the loss limit is reached, stop the loss immediately regardless of the price.
To use this stop loss method, you must pay attention to the following two points:
(1) Different currencies or different operating time periods shall adopt different stop loss limits.
(2) The established stop-loss limit must be verified by probability in the market.
The advantages of this stop loss method are obvious:
(1) Highlight the principles of fund management. Foreign experience shows that an excellent foreign exchange trader is not how to analyze the market but how to manage funds.
(2) It has an advantage in probability, the longer the operation time, the more obvious the advantage.
(3) The stop loss position is far away from ordinary investors, which prevents the market risk caused by the first stop loss position setting.
When using this stop loss method, you need to do a lot of statistical and analysis work, determine the operating strategy, and find the best stop loss amount that suits your operating style.
- Stop loss after reaching the limit of self tolerance
This type of stop loss method is often used by beginners. The author’s experience is that using this stop loss method in short-term operations is still helpful to increase the rate of return. In fact, some excellent foreign traders often use this method.
The specific method of use is: when your position has a loss, as long as you can bear it, you can hold your position, otherwise stop the loss immediately, even if you have just opened a position.
What are the stop loss methods for foreign exchange speculation?
- Trend Tangent Stop Loss Method
Including the exchange rate effectively breaking through the tangent of the trend line; the exchange rate effectively breaking through the Gann angle line 1ⅹ1 or 2ⅹ1; the exchange rate effectively breaking through the lower track of the ascending channel, etc.
- Form stop loss method
Including the exchange rate breaking through the neckline of the head and shoulders, M head, and arc top; the exchange rate has gapped downward and broke through the gap.
- K-line stop loss method
Including the appearance of a short gun with two yin and one yang and two yang and yin after the yin, or the appearance of a yin and broken three-line head guillotine, as well as the appearance of evening stars, piercing heads and feet, shooting stars, double flying crows, and three crows hanging on the treetops Wait for the typical K-line combination that peaked.
- Chip stop loss method
The area where chips are intensively traded will have a direct support and resistance effect on the stock price. After a solid bottom is broken down, the original support area will often turn into a resistance area. Set the stop-loss level according to the chip trading intensive area, and stop the loss immediately once it breaks.
The setting of stop-loss price should pay attention to the following factors:
First, we must focus on the general trend and look for historically major barriers or new highs (new lows) in the technical graphics, or the market has more than once “proved” a price that is difficult to break through;
Second, the main analysis price in technical analysis, technical indicator price is usually used by professional traders and professional traders, these price points also need to be paid attention to;
Third, the price that the government or central bank official once emphasized;
Fourth, the most important point is to continuously summarize and accumulate from daily operations, and find the stop loss method that suits your situation is the key.