Monday, January 6, 2014

Using stops and stop losses in forex and stock trading.

  Any good trading plan will include how to use stops, and stop losses. Your trading rules will put stops at the top to save your money and protect profits. It should be logical in your trading process for executing profitable trades. You should have your setup written down in your plan. As a trader you should use patience and discipline to wait for the best area to buy. You will have more success because you have tested your trading plan and know that it has a profitable track record. Knowing your buy strategy will help you execute your trading plan in an smooth manner with no hesitation.

   Your risk management is also thought out so your initial stop is set on entry and you know when you will be moving your stop loss to breakeven after the forex or stock moves in a positive direction by a certain percentage. You should  have a set price target, a trailing stop, and stop loss already figured into the trade. If your trade is in the money and you are seeing profits, you may want to start to using trailing stops to help you lock in your profits. If the trade is following a good trend just re-set your trailing stop.
  Experienced traders know the percentages are in their favor if they stay with the trend. It is much easier than trying to pick tops and bottoms of a range bound trade. The top and bottom pickers will eventually lose the money in their trading accounts. Support and resistance levels are really not the same as tops and bottoms so you need to adjust your trading to make it less risking and lock in profits. Staying with the trend is much safer than countertrend trading. Trading  the forex market with the trend will have a better risk reward. The trader will be in the money for a longer period of time.