The Forex trading tip given in this article is so important that it would determine beforehand if the Forex trader will make it in the markets.
It is practically a secret Forex tip, known and used earnestly by every successful trader.
The new Forex trader should learn and use it straight away as a key component for Forex success.
In Forex trading, much like trading in other markets, stops are an important element for successful trading.
The stop is a simple yet effective tool that gets you out of a losing position.
It is a way of accepting that your opinion of a particular Forex trade is amiss and it is time to cut loss.
Provided it is managed correctly, that is.
But traders are human after all, so they are susceptible to letting negative human behaviours wield their influence.
Most people cannot accept a loss.
When money is at stake, emotions and ego frequently are on the line too.
So when the Forex trader is faced with a losing position, the natural reaction is to let it be and believe the market will soon recover to prove his prognosis right.
It is true that Forex prices often move within bands, so this might suggest the idea that a rebound is forth coming.
But it is also evident that when prices start to move out, they can do so very rapidly, thus widening a loss substantially.
In reality, the Forex market reacts mainly to supply and demand factors.
When you are betting that prices will move one way, there are others that are taking the opposite view.
The market is unaware if you went long or short in any case.
But because you are playing with your money, you can become emotionally attached to your positions and think that the market involves itself similarly.
For most traders, it is the thought of profits that fill their minds, so they are quite clear when they should cash out.
Since they do not prepare for the event of a loss and hence are mentally not accepting it, such traders often are helpless when faced with losing trades.
During such times, they let their emotions rule them and start hoping for prices to reverse, rather than taking the painful step of closing out losers.
At times, a losing Forex trader will get lucky and actually see the losing position turn around.
This has the undesirable effect of stroking the trader's ego and making him think he can beat the market.
This trader continues to trade with an unchanged mindset and attitude, repeating the same mistake of not cutting losses quickly.
Ultimately, the Forex trader takes a huge loss, desperately.
The right thing to do is to begin with a "pain" point for every Forex trade, the price level at which you would consider the trade idea has been proven wrong and you would quit the trade.
This stop level must always be known before a trade is taken and it should become committed to a working order once a trade has been filled.
The trader can choose between entering an automatic stop order or keeping a mental stop.
Automatic stop orders are certainly much better as you do not leave anything to chance -- when your Forex trade is proven wrong, you take your losses without fail.
While mental stops can be appealing, the trader can at times be seriously challenged during fast moving Forex markets, to the extent that the need to cut loss becomes questioned.
Quitting losing positions when mental stops are hit is usually ignored by most traders; worst, traders might be tempted to relax their stops to stay in their trades.
Admitting to bad trades and dealing with them are part and parcel of the Forex trading game.
Without doubt, it feels easier to hang on to a loser and harder to take a quick loss.
However, ignoring losers is a self-destructive attitude that will ruin the Forex trader, more often sooner than later.
Always know where your stops are in advance, put them to work expeditiously and heed them without fail.
When you are confronted with a losing position, it is not just money you are losing but more importantly, you are losing your objectivity as a Forex trader.
As soon as you let personal feelings such as fear, hope or revenge affect your judgment, you fall into a deeper hole from which it becomes even harder to climb out.
Using stops removes your ego from the trading equation, thus reigning in your emotions and saving you from mental anguish.
Only when you do not have losing positions hanging over your head can you then restore your mental capacity to plan for and take on new trades.
By using stops to control your losses, you preserve your trading capital and give yourself the opportunity to take the next high-probability trade.
Work on this positive behaviour to secure your success in Forex trading.
It is practically a secret Forex tip, known and used earnestly by every successful trader.
The new Forex trader should learn and use it straight away as a key component for Forex success.
In Forex trading, much like trading in other markets, stops are an important element for successful trading.
The stop is a simple yet effective tool that gets you out of a losing position.
It is a way of accepting that your opinion of a particular Forex trade is amiss and it is time to cut loss.
Provided it is managed correctly, that is.
But traders are human after all, so they are susceptible to letting negative human behaviours wield their influence.
Most people cannot accept a loss.
When money is at stake, emotions and ego frequently are on the line too.
So when the Forex trader is faced with a losing position, the natural reaction is to let it be and believe the market will soon recover to prove his prognosis right.
It is true that Forex prices often move within bands, so this might suggest the idea that a rebound is forth coming.
But it is also evident that when prices start to move out, they can do so very rapidly, thus widening a loss substantially.
In reality, the Forex market reacts mainly to supply and demand factors.
When you are betting that prices will move one way, there are others that are taking the opposite view.
The market is unaware if you went long or short in any case.
But because you are playing with your money, you can become emotionally attached to your positions and think that the market involves itself similarly.
For most traders, it is the thought of profits that fill their minds, so they are quite clear when they should cash out.
Since they do not prepare for the event of a loss and hence are mentally not accepting it, such traders often are helpless when faced with losing trades.
During such times, they let their emotions rule them and start hoping for prices to reverse, rather than taking the painful step of closing out losers.
At times, a losing Forex trader will get lucky and actually see the losing position turn around.
This has the undesirable effect of stroking the trader's ego and making him think he can beat the market.
This trader continues to trade with an unchanged mindset and attitude, repeating the same mistake of not cutting losses quickly.
Ultimately, the Forex trader takes a huge loss, desperately.
The right thing to do is to begin with a "pain" point for every Forex trade, the price level at which you would consider the trade idea has been proven wrong and you would quit the trade.
This stop level must always be known before a trade is taken and it should become committed to a working order once a trade has been filled.
The trader can choose between entering an automatic stop order or keeping a mental stop.
Automatic stop orders are certainly much better as you do not leave anything to chance -- when your Forex trade is proven wrong, you take your losses without fail.
While mental stops can be appealing, the trader can at times be seriously challenged during fast moving Forex markets, to the extent that the need to cut loss becomes questioned.
Quitting losing positions when mental stops are hit is usually ignored by most traders; worst, traders might be tempted to relax their stops to stay in their trades.
Admitting to bad trades and dealing with them are part and parcel of the Forex trading game.
Without doubt, it feels easier to hang on to a loser and harder to take a quick loss.
However, ignoring losers is a self-destructive attitude that will ruin the Forex trader, more often sooner than later.
Always know where your stops are in advance, put them to work expeditiously and heed them without fail.
When you are confronted with a losing position, it is not just money you are losing but more importantly, you are losing your objectivity as a Forex trader.
As soon as you let personal feelings such as fear, hope or revenge affect your judgment, you fall into a deeper hole from which it becomes even harder to climb out.
Using stops removes your ego from the trading equation, thus reigning in your emotions and saving you from mental anguish.
Only when you do not have losing positions hanging over your head can you then restore your mental capacity to plan for and take on new trades.
By using stops to control your losses, you preserve your trading capital and give yourself the opportunity to take the next high-probability trade.
Work on this positive behaviour to secure your success in Forex trading.
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