Thread: Importance of stop loss placement in forex trading.

FOREX TRADING: IMPORTANCE OF STOP LOSS PLACEMENT



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.
In the chart above, is an example of the importance of stop loss placement.
Usd chf h4
In the highlighted box, thats a pin bar. When some guys see this pin, they will naturally take it down and the ideal place for their stop loss is the horizontal line in orange that is drawn.
Scenario A) if the trader did not place a stop loss, or a mental stop loss – look at how high the usd chf pair went upwards. Their account will be blown or had a huge huge loss.
Scenario B) Trader shifted their stop loss backwards from the initial orange line thinking that the trade will go back down. They would have taken a huge loss as the move went up terribly fast and would have gotten a big blow to their account
Scenario C) Trader sticked to their initial stop loss, they would have just gotten a standard loss of the % risked in their account, based on their money management. And this is just one of the trades among the plenty, therefore this loss is not a big deal.
I hope you guys can see the importance of placing and sticking to your stop loss. Or else your account will be blown before you know it.
Ezekiel Chew
Asia #1 Forex Mentor from www.asiaforexmentor.com

The article is very helpful & interesting.

Believe it or not there is an opportunity in Forex for one to guarantee a successful trade. Imagine that. Being able to enter the market and have a 100% assurance that you will come out a winner. The concept is called arbitrage trading. An arbitrage opportunity exists when there are discrepancies in the market between brokers.
Nobody likes to lose. However, in any game there is always a winner and a loser. Even in Forex Trading, when you win, you are ultimately taking money from someone that lost it. And if you have any good sense, you want to be on the winning side of that transaction.
Losing, however, is inevitable. During your journey through Forex you will lose countless times. This is a fact that you need to accept early on. Losses are just a part of the equation.
As regard to how to take a loss in forex , Firstly,we should embrace losing , If you know it is going to happen, there is no good sense in getting all upset over it. If anything, think of losing as learning a lesson. You put money into the market and are making an educated prediction on what the market will do. And when you were wrong, you paid for that lesson. Nevertheless, if you were wise, you would have learned from your loss.Secondly ,building a long-Term trading strategy, that is to say you should have a plan when fear attack. The basic idea is to anticipate the unwanted emotions – that way it won’t be a big surprise when the rollercoaster begins! Once the feeling is there, make sure you acknowledge it instead of putting it aside. Give this fear attack a name and repeat it out loud. At lastly, have an action plan to deal with emotional experience, for example, stop trading immediately and take a shower!