The intra day forex market is full of noise that it becomes difficult for new traders to understand where to put the stop loss. There is so much noise in the forex markets in the short run that prices tend to jump 10-20 pips for no apparent reason.
The noise in the intraday market keeps on frustrating new day traders. They constantly find their stop losses being tripped even when the rates are going in the anticipated direction.
Many new forex traders develop the habit of using a static 10-20 pip stop loss. This is an arbitrary decision. Many also try using a trailing stop loss. However, if placed too close; your stop hits too early. And if placed too far; you will have to forgo potential profits if the price retraces later on.
Many professional forex traders do use stop loss but mostly place it on their computers hiding them from their brokers. Best way to place a stop loss is using a dynamic level.
Because if brokers find many stop losses at a particular price level they can easily trip them using a momentary blip in their price feeds. You cant do anything. It was a momentary spike during to a sudden large transaction in the market. This is known as Stop Hunting.
Do you know this many professional forex traders only use a stop loss in their mind. They plan entry/exit for each position. Keep on monitoring it changing, the stop loss in their mind as the rate fluctuates. When they reach the desired outcome, they close the position. With experience, you will also learn to do the same.
Moving Averages, Bollinger Bands, SARs etc can be easily used as dynamic stop losses by you. It is a good way to manage your risk while letting the currency markets to do what it wants.
With more experience, you will learn that placing fixed stop losses actually harms more. Rather than helping, using a fixed stop loss can hurt you more emotionally, psychologically and profit wise.
Never ever trade, just before a major economic news release. Dont place your stop loss close to or at round numbers and at times of thin liquidity in the markets.
You should understand that your broker can and will use stop hunting to take out your positions using noise in the market as an excuse. Forex trading and casinos have many things in common. You should learn how to beat the markets and the brokers only then you will become a successful forex trader. - 15790
The noise in the intraday market keeps on frustrating new day traders. They constantly find their stop losses being tripped even when the rates are going in the anticipated direction.
Many new forex traders develop the habit of using a static 10-20 pip stop loss. This is an arbitrary decision. Many also try using a trailing stop loss. However, if placed too close; your stop hits too early. And if placed too far; you will have to forgo potential profits if the price retraces later on.
Many professional forex traders do use stop loss but mostly place it on their computers hiding them from their brokers. Best way to place a stop loss is using a dynamic level.
Because if brokers find many stop losses at a particular price level they can easily trip them using a momentary blip in their price feeds. You cant do anything. It was a momentary spike during to a sudden large transaction in the market. This is known as Stop Hunting.
Do you know this many professional forex traders only use a stop loss in their mind. They plan entry/exit for each position. Keep on monitoring it changing, the stop loss in their mind as the rate fluctuates. When they reach the desired outcome, they close the position. With experience, you will also learn to do the same.
Moving Averages, Bollinger Bands, SARs etc can be easily used as dynamic stop losses by you. It is a good way to manage your risk while letting the currency markets to do what it wants.
With more experience, you will learn that placing fixed stop losses actually harms more. Rather than helping, using a fixed stop loss can hurt you more emotionally, psychologically and profit wise.
Never ever trade, just before a major economic news release. Dont place your stop loss close to or at round numbers and at times of thin liquidity in the markets.
You should understand that your broker can and will use stop hunting to take out your positions using noise in the market as an excuse. Forex trading and casinos have many things in common. You should learn how to beat the markets and the brokers only then you will become a successful forex trader. - 15790
About the Author:
Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stock and forex trading. Download Forex Scalping Cheat Sheets. Discover The Best Forex Signal Service! Read about Trend Forex System.