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| Where To Place Stop Loss? |
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| Written by Hass67 |
| Thursday, 23 April 2009 10:13 |
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Currency prices in the forex markets are always jumping up and down. Forex markets are volatile most of the time. In the short term, you will only find noise in the intra day forex market. This makes it difficult for new day traders to know how to put a stop loss. Most of the time, prices in forex markets jump 10-20 pips for no apparent reason. Most of the new forex traders get frustrated to find their stop loss being constantly tripped due to noise even when the market is going in the anticipated direction. A static 10-20 pip stop loss is an arbitrary choice many traders make. Many new traders also use Trailing Stop Loss. Place your trailing stop loss too close and you will find your stop hit too early. Place it too far and you will have to forgo potential profits if the price retraces. Many professional forex traders do use stop loss but mostly place it on their computers hiding them from their brokers. Best way to place a stop loss is using a dynamic level. Stop hunting is something the brokers are continuously doing. If a broker finds many stop losses at a particular price level on his price feed; he can easily trip them using a momentary blip in the price. You cant even complain. The momentary spike happened due to a sudden large transaction in the market. However, many professional forex traders only use a stop loss in their mind. They continuously keep on updating it until they get the desired outcome. But you will need a lot of experience trading the forex markets to do this. Using dynamic stop losses such as Moving Averages, Bollinger Bands, SARs etc is a better way to reduce your risk while allowing the markets to do what it wants. The more experienced a trader you will become, the more you are going to realize that placing fixed stop losses actually hurts you more emotionally, psychologically and profit wise than help you. Never ever trade, just before a major economic news release. Dont place your stop loss close to or at round numbers and at times of thin liquidity in the markets. You should understand that your broker can and will use stop hunting to take out your positions using noise in the market as an excuse. Forex trading and casinos have many things in common. You should learn how to beat the markets and the brokers only then you will become a successful forex trader. About the Author: Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stock and forex trading. Discover a revolutionary new broker buster Forex Robot. Learn Forex Trading! Kindly provided by LJ-Marketing.dk You are welcome to use this article on your own website, if you include the link just before this text. |
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