Thousands of websites are telling investors what to do and what not to do. There are virtually millions of pages of resources that will educate investors on how to prepare a plan but will not tell them how to develop a contingency plan. Many experts are providing lessons on how to understand the industry in one month, but not on how to keep the fund safe. However, the two most underrated yet significant features of Forex are stop-loss and take profit. If not done correctly, they can sweep the funds from your account.
Most beginners have no idea how these work and they set them at unrealistic positions. In this article, we are going to talk about two very practical implementation tools that can save your career. Whether you are sleeping or out on a vacation, this strategy will be got you covered. All you need to do is follow this article very carefully and relate it to your scheme to identify which position is suitable. Depending on your trading strategy, it will vary for people but a certain position will be required to limit potential loss.
Getting into the details
First, a small introduction is required. They are exactly what they sound. The first one is a tool that will automatically and remotely execute the order whenever a certain point has been reached on trade. Imagine you have a sell order open and there is suddenly an electricity power outage. In normal situations, the direction moves against and this will empty the account in no time. Moreover, a trader has no control over the order now. What this tool does is amazingly simple yet career-saving.
If you set the stop-loss to execute at a 4 dollar loss, it will automatically close the trade at that point. If the trend still goes down, there should be any anxiety as it has been taken care of by the platform. Take-profit also does the same thing only it executes in terms of profit maturity. After achieving a certain amount of profit set by the investor, the order will be closed. Sometimes trends dive down after reaching our expected profit, in those circumstances, it can help to have a positive balance in your account.
The unpredictable nature of the market
Those who are thinking that they know everything about this market are making a big mistake. No matter which Forex trading strategies you use, you must have the ability to accept a few losing trades in a row. Without accepting losing trades, you won’t be able to deal with this market. It takes strong mentality to accept managed losses on regular basis. After you develop this skill, you will be able to make decent profit without having any big issues. So, get ready to deal with unexpected results.
How to set them appropriately?
This is the million-dollar question. It depends on the investors, their trading method, the existing market trends, the news, and many other volatile factors. In general speaking, it should not be set at too low or too high. If one trade is open and the person has only 100 dollars in the balance, there is no meaning to setting the stop-loss at a 50 dollar loss. By that time, he would have lost half of his capital. Set the stop-loss at a strategic position so that the normal volatile movements cannot close the order. In this context, a little knowledge of analysis is required to clear up any confusion.
Do not depend on assumption as it may not work out expectedly. The same rule applies to take profit also. Do not expect to make 100 dollars from one trade. 10 dollars is a good deal and be content with that. Make sure the practical method has been used in terms of practical outcomes. Don’t expect too much or become too ambitious.