You see the picture above? That’s how YOU WILL look like if you don’t practice Stop Loss.
Stop Loss – A Traders Best Friend
A lot of traders do not believe in stop loss placement. Some believe in mental stop loss placement. Meaning that when they feel that a trade is not going their way, they will then cut it off.
That is so terribly wrong. Stop loss placement is one of the most crucial key if you want to make forex trading profitable.
Another mistake traders make is that they shift their stop loss. They shift it backwards, thinking that the trade will just go back a little more and will come back their way. And sure enough, most of the time, they took more losses than they would have if they stayed on their initial stop loss.
What Is A Stop Loss Order?
A Stop Loss Order is an order placed through a broker (physical or online) to buy or sell once the stock reaches a certain price. A stop-loss is designed to limit an trader’s loss on a security position. Setting a stop-loss order for 10% below the price at which you bought the stock will limit your loss to 10%. For example, a trader takes a long position on EURUSD at 1.3100, with a 50 pip stop at 1.3050 and a 100 pip limit at 1.3200. Whenever the trade moves down to 1.3050, the stop loss order made earlier will automatically close the trade at that position, without further damaging the traders loss. Trust me, it usually goes down further than 50 pips 😉
It’s a safety net, especially in times when the traders heart goes way over board the traders head. This was me. I’ve been telling most of my newbie traders that to have a this safety net, this parachute, this fire extinguisher in trading is crucial WITH ALL TRADES. I personally lost almost USD 10k within 3 months all because of playing with emotions instead of experience and knowledge (I’ll talk about this soon).
A Stop Loss Order Is Available For You To USE IT!
A stop-loss order is a simple tool, yet so many investors fail to use it. Whether to prevent excessive losses or to lock in profits, nearly all investing styles can benefit from this trade. Think of a stop loss as an insurance policy: you hope you never have to use it, but it’s good to know you have the protection should you need it.
Trust me, it’ll do you good in the long run.
Hope this helps.