Stop Loss?? I Don't Want To Use It.

Last week I was reviewing a website which has a trading signal program for those investors who prefer to not being involved in confusing market analysis and I respect them because such services normally will bring them more time to do other important things in their daily life. But the interesting thing was the most of signalers did not actually place a stop loss point on their recommendations. Is that so because they know they are right all the time? Or that's because they did not lose half of their trading account in an unexpected slump of 200 hundred points and a single trade.

 

However, the answer is most of them have something between -1000 to -5000 pips of open trades on their signal board and they actually trapped in desperately while they could cut the losing trades and ran another one instead. Also I should mention that there are some other types of system trading that called "Hedge Fund" and I don't actually want to argue if they are right or wrong. I am definitely talking to day traders who get into challenge with big bear every day.

 

Sometimes, I don't understand why a trader could be convinced of not having a Stop Loss while we see almost every month an unexpected uncounted impulse (I would call it Best of the Test for whom with less of the rest) in the market.

 

There is no specific rule as to where you should place the stop loss, so consider the below mentioned tips as the general rules and ask your mentor to fit reliable Stop loss rules just for you and your trading system(If you have one?).

 

• Many loser traders do place the same stop loss for all the trades they execute without even trying to measure market environment.
• Don't be scared of placing a stop loss while it is for your gain and you must know what your profit objective is.
• Stop Loss should not be too close to the current price while most of the stop loss enemies have ruined their trading accounts already just by using very close ones.
• Stop Loss should not be too far from the point you get into trade while it's better to not placing any Stop Loss rather taking an unreachable, fictional protector.
• Try to not to risk more than the points of your profit goal. Pro traders recommend to only take those trades which have at least 2 points of potential profit per 1 pip of potential lose, but I would say it is completely depends on the money management system that you use, as different money management systems has different recommendations for Risk & Reward.
• Sometimes a trading system does not work if you risk less than recommended %7 to %10 of your total account balance. It means you trade oversize or you just entered the market when everyone else getting out of the market. In this case this is not your fault as it has a clear message for you "don't trade this way anymore and ask an expert to solve the problem".
• If you are convinced enough that you can make up 1 million dollar out of your 10000 dollars account by not using stop losses as you may think you are the one who knows the price will be back on its way to you instead of hitting new highs, well, simply you are wrong.
• Remember, there are no sky limits for the price of any of currencies in FOREX market.
• If you don't like to place a pre defined Stop Loss on your trades, please ask someone to show you how to follow a wining trade by using "Trailing Stop".
• Be sure it is better to have one or two losing trades with 100 points of lose, instead of being desperate with sinking into -1000 pips of dizziness.
•  

How to Define the Best Stop Loss point?

 

Try these tools to define the most accurate stop loss points easily:

 

• Use 10 pips over/below the first Parabolic SAR spot(dot) appeared over/below the price candles for Short/Long Trades.
  Note#1: Remember you just can use 10 pips above the parabolic SAR dots as an Stop Loss point when you have a Short trade and Vice Versa.
  Note#2: You realized that the Stop Loss obtained from SAR is too far from the point which you want to enter the market. OK, this means you are about to enter the market very late so better to not do it.
• Use 10 pips over/below the day before yesterday's HIGH and LOW and in the case of the market has moved a lot far, use 10 pips over/below the yesterday HIGH and LOW as a Stop Loss point for your Short/Long trades.
• Use two Moving Averages of 55 EMA and 144 MA. You may place your stop loss just 10 pips below/above one of those two MAs depending on how do you set up the profit/loss game for your Long/Short trades.
  Note#: If you trade on the range market break out be aware of this kind of Stop Loss setting, and it is quite safer to use another way.
• Place the Stop Loss 10 pips over/below Bollinger Bands Upper/Lower band for Short/Long trades.
• If you use Elliot Waves theory to analyze the market:
  # Place the Stop Loss just 10 pips below the lowest point of the Second (2) wave in bullish trend when you LONG on Wave 3.
  # places the Stop Loss 10 pips below the lowest point of the 4th Wave when you go for LONG on 5th Wave.
  # Place the Stop Loss right above/below the top/low of the previous wave when you go for SHORT/LONG based on A-B-C correctional waves.

 

Notes:

 

• Aforementioned suggestions are based on 4Hours chart.
• Those ways of defining Stop Loss points has worked for me, but It does not necessarily works for you, so ask your mentor or an expert friend to do evaluate the probability of fitting those suggestions to your trading strategy.
• 10 pips are because sometimes price hit the important support or resistance levels by more than a touch.
• Please don't forget, the Stop Loss issue is not actually a game. It is not even an option for you; it is a "MUST" and will save you when you can do nothing, so refresh your mind in this case.

by S.A Ghafari

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Too Many Strategies, But Still Frustrated?

It is not too long ago when veteran traders used to draw trend lines using pencil and paper. Market data was sent by physical mail to them and there was no computer and trading desk. Were they really not able to perform by not using super analytical charting platforms? Were they all losers? I bet they were not only doing great, but compared to my fellow traders (Including me) they were absolutely sophisticated traders. I don't want to undermine anyone as we have many legend traders and hundreds of good traders who actually make money around the globe on daily basis. My argument is merely pointed at those traders who think that broken accounts is a result of them not really having the best strategy to trade in a safe and secure manner while at the same time having a one year outlook for reaching 1 million dollar, through a 10000 buck trading account.

 

Where a trading strategy is introduced as a reliable method of making money for traders, there are some questions that must be asked, to evaluate the accuracy of the given strategy:

 

• Is it a trend or a range market based strategy?
• If it works as a trend based strategy, what can the strategy offer to trade around range markets, and vice versa for the range market based strategy?
• Is it a day trading strategy or planned to signal longer term trading signals?
• If it is an Intraday trading strategy, how many hours are required and when exactly should I sit down and watch the screen?
• If it is a long term strategy, what is the estimated possible drawdown in pips?
• Is there any historical performance of trading using the given strategy in real accounts and if the answer is "YES" for how long? (don't rely on less than one year)
• Are there any money & risk management rules attached that are specifically tested on this particular strategy?
• What is the average/highest/lowest risk to award ratio of the last year's trades?
• Is there anyone who has used the strategy on a real account? (Be aware of marketing tactics and ask someone who is honest).
• What is the outcome of the trades for the above mentioned trader? Even if positive, don't necessarily trust that exact approach for yourself, because one cannot fit a common strategy with the same characteristics to every trader. In this case you need to test it yourself.
• Ask the developer about the psychological pressures that may come upon you while using that strategy on real accounts (We recommend to ask your mentor to analyze the strategy)
• Does it have an Exit and Stop Loss rule for different market situations?
• Ask the developer if you can get back to him occasionally to ask questions about some points that you don't really understand (don't make it 100 times a week cause he/she won't sell any strategy to you).

 

However, I know a couple of guys who experienced real damage and disappointment where they tried to believe the strategy given to them from the first day. So I am being serious when I say don't ever try to apply a new strategy on your real account, unless you have met an expert and he has given you the green light, or if you have just passed one year of continuous testing.

 

Final Words:

 

You may ask for how long? One year... it's too much...I can't wait...!! Well then you can try it, but count on it as a gamble...You know the gamble...Too many jack pots, nothing Hot Shots.

 

Let science make you wealthy step by step. Don't ever think you are smarter than any other trader because no one knows what is going to happen next. So it's better to be next to those wise traders who win, because they are disciplined and have spent a long time practicing before doing anything real on their money. Try to admit it if you are not sure enough about your ability, and try to solve the problems with patience and remember it is worth it if you make that million dollars three or even five years later, instead of losing what you got from hard work within just a couple of days. 

 

by S.A Ghafari

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FOREX Education — Thinking Of Buying FOREX Advice? Read This First

There is a huge amount of FOREX Education you can buy but before you buy it read this, as in excess of 90% of it will ensure you lose.

So you ensure you get the right FOREX Education follow the guidelines below.

1. Never buy a day trading system!

Most novice traders are enticed by the theory of making money everyday, with low risk and high rewards, but this is not the reality of day trading.

The reality of day trading is:

A quick wipe out of equity — why?

Quite simply, all short term moves are random and using support and resistance as day traders do is destined to failure.

If you don't believe me try this simple test when buying any FOREX Education from a vendor:

Ask for the real time track record of profits and you won't get one from a day trader.

At best you will get a hypothetical track record, but that's done in hindsight, knowing the closing prices and if we know the closing prices its not hard to make money.

If you want to make money don't day trade!

2. Real time profits

A real time track record is an essential requirement on ANY FOREX education you buy, not just day trading systems.

The fact however is, most FOREX education is sold by failed brokers, or people who have never traded in their lives.

If these people have not had the confidence to trade their own money on their own system why should you?

3. Understand the FOREX Education

Even if you are lucky enough to find a system that does have a track record of real FX Profits you need to be mindful of the following:

You need to fully understand the method and not follow it blindly.

If you don't understand why a method works you won't have confidence to follow it through inevitable periods of losses.

Not only must you understand it to follow it with discipline, you must also check it fits your trading personality.

Some traders can take big drawdowns or losses, other traders find them hard to take, so pick a system with a risk to reward you can handle emotionally.

4. The best FOREX education

There is a huge amount of FOREX education and FOREX advice free on the web, so use it.

In other articles we have shown how to build a system that makes profits from free info and it's a lot easier to learn FOREX Trading this way than many people think.

You can also get some great FOREX education at nominal cost from your local bookstore this FOREX advice is from:

Traders who don't just talk the talk — they have walked the walk and made money.

Great books to look at are Jack Schwager's excellent Market Wizards and New Market Wizards — which interview some of the best traders of all time.

Trader Vic — Victor Sperandeo a great all round book and there are many more.

Rather than buying a e-book from someone without a track record, get your FOREX Education free on the net and get some classics from legendary traders.

Most of the courses and systems on the web are over priced, don't work and you can frankly, do better on your own with the above advice.

by Sacha Tarkovsky

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Secrets To Potentially Making Money In The Forex Markets

How would you like to be able to potentially make money trading currencies in the Forex markets? Better yet, how would you like to be able to potentially do this within strict risk control parameters? Even better yet, how would you like to potentially do it with a minimum of effort on your part? I'm talking about only10 minutes a week. Well, I am here to tell you a few key principles or secrets to potentially make it happen.

 

Secret #1

 

The Forex markets are heavily advertised as being a great way to make money, which is very misleading. The unwary would-be Forex trader is led to believe all she has to do is open a Forex account to gain access to one of the many excellent Forex trading platforms, begin trading and then become rich in no time. So what's the secret? The Forex market is a highly liquid, potentially profitable market to trade, sure enough, but only if you have a winning edge methodology that you can apply to these markets. Without such a methodology, the hapless trader will quickly lose money trading the Forex as they would any market.

 

Secret #2

 

The Forex markets are heavily advertised as commission-free. True, but unlike the futures market, entering and exiting positions in the Forex markets is done by buying at the high end of a rather wide bid/ask spread and selling at the low end. So the difference in the spread is your cost of doing business. This cost may be acceptable for swing and long term traders, but may not be acceptable for day traders. So if your goal is to make money, you may not wan to day trade the Forex markets.

 

Secret #3

 

While swing trading could be potentially profitable trading the Forex markets, there is potentially greater opportunity trading the long term trends. Currencies have always moved in long sweeping mega-trends that potentially offer low risk entry points and the potential opportunity to ride a long money making trend (sometimes for several months). The following wisdom from legendary stock trader Jesse Livermore is equally applicable to the Forex markets:

 

"And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying and selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine — that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance."

 

Secret #4

 

Potentially the best way to trade for the longer term is to trade off of the weekly charts, thus avoiding the day-to-day volatility that wreak havoc on one's account or at a minimum shake you out of your position prematurely and potentially missing a big money move altogether. By definition, then, a potential winning edge methodology based on a weekly chart only requires analysis once a week after the futures markets close for the week each Friday. You then simply update your chart, determine the following week's entry, trailing stop loss and profit target orders, which should be placed before the futures market opens on Monday. A clarification is in order here, even though we are trading the Forex market, we can use the weekly futures markets charts for determining exit and entry orders that can then be executed in the Forex market. And these same signals, by the way, are equally executable in the futures markets. It becomes a matter of which market platform you prefer to trade the currencies.

 

It should be clear from this discussion that there is no magic to trading the Forex or currency futures markets. The magic is in the potential winning edge methodology that you apply to these markets that makes the money.

by Bill Poulos

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Two Timeless Rules in FOREX Investing

RULE #1) ~ Cut your losers; let your winners ride.

 

One important thing that every new trader must know before entering this highly profitable business is that life is not perfect, even in Forex land, and you should always know one fact: YOU WILL HAVE LOSING TRADES.

 

Every Forex trader does. The key to being a consistent, predictable, reliable trader is to, at the end of the day, add up more wins than losses. And, when you KNOW(based off your trading rules), without a doubt, that YES, indeed you are, in a losing trade, don't keep losing money (lowering your stop loss) just to *prove you are right* or your rules are wrong (however you want to look at it).

 

All traders have to face it — you can't turn a donkey into a ferrari. You can't change the strips of a zebra and you can't turn chicken poop into chicken salad. The best trades are usually "right" immediately (the techniques, rules, methods and strategies you can learn in my website will be your best indicator for just what a "right" trade really is).

 

Remember, people have been trading the markets for a hundred and sixty years. The smart traders know there's going to be another trade. Cut your loses short and compound those winning positions.

 

RULE #2) ~ Thou Shall Not Trade the Forex Without Placing a Stop Loss Order.

 

When you place a STOP order, right along with your ENTRY order, via your online trade station, you've just automatically prevented a potential loss from "running" too far.

 

Before initiating any trade, if you haven't already figured out at what point you would be wrong and would want to cut your loses or, at the very least, reevaluate your position from the sidelines, then you shouldn't be putting on the trade in the first place.

 

Show me a Forex trader who doesn't use stop loss orders and I'll show you someone who loses a lot of money.

 

by Adrian Pablo

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How The Matrix Will Boost Your Forex Profits?

Perhaps you remember one of the most impactful movies of our time, the Matrix? Morpheus believed totally in Neo to the point where he almost sacrificed his life to save him. Yet Neo did not believe in himself at the beginning, he was most uncertain about whether he was the One or not. So when he went to see the Oracle, she told him that being the One is like being in love, nobody tells you that you are in love, you just know it. The Oracle pointed to a sign hanging on the door: "Know Thyself"...

 

Still Neo didn't believe in himself but when agent Smith captured Morpheus and a member of his crew suggested to pull the plug so the agents of the Matrix won't get access to Zion, something in Neo changed and he began to believe...

 

A little further down the path of the One, Neo "accomplished miracles" because he learned how to believe in himself fully and completely. And remember Neo had a mentor who believed in him beyond any doubt and who taught him how to use his mind to defeat the Matrix and its dangerous agents. Neo's mentor, Morpheus, showed him the path and helped him empower his mind, yet Neo walked the path to his own success after he started believing in himself and mastered his own mind.

 

Perhaps you were wondering, yes and what has this to do with trading the Forex market?

 

"Know Thyself"

 

Forex trading or any trading for that matter is a mind game in the first place. Some people spend a lot of time and efforts perfecting certain trading skills and knowledge like reading the charts and data, entry and exit skills but any normally intelligent person can learn these skills, they are the easiest part of the trading game. They are no doubt necessary tools to your Forex success but they don't make the biggest difference between a really successful Forex trader and the one who is not successful. So what does make the difference?

 

Let's ask the question: what is your goal in trading the Forex? It is to make money. Period! Surely while you're making the money and great profits you can have fun too and you should but what you need are specific mental attitudes and strengths, that is if you want to be a successful Forex trader. These mental states are an asset that will help you in many other situations and contexts of your life.

 

As my Forex mentor told me, the major three mental and emotional frames of mind that characterize the majority of successful FOREX traders are:

 

1.Discipline & Passion 2.Confidence & Courage 3.Patience & Smart Persistence

 

We'll touch upon all three briefly to make it as clear as crystal to you so you succeed in the Forex market.

Like trading a Pair of Currencies these mental and emotional mindsets go hand in hand.

 

Discipline & Passion

 

Discipline, say the most successful Forex traders, is really important! It helps you be more effective in planning your trades and in sticking to the good plans you established before entering the trade. Always have an action plan for stop and limit levels for the trade before you enter it, your analysis should cover up the expected upside and downside.

 

Passion means commitment and love for what you do. It is your passion for something that keeps you going, improving, constantly learning (willing to buy excellent Forex courses from experienced and successful traders, remember Morpheus mentoring Neo) and persist beyond the ups and downs of the business. You need to know why you are trading the Forex because it is an awesome opportunity that you have to take, so develop a passion for it. Simply do what it takes to be successful, learn from the best.

 

A word of Caution: Never mistake your "Forex passion" for emotion that you might feel while trading the Forex, when trying to enter a trade without using clear and sound entry/exit indicators and rules. Have fun, learn, and stay tuned for future developments and grow as a person in strength and character in "your Forex business" while remaining emotionally detached when you get in and out of a trade. If you do, you are bound to incredible success in the Forex trading business.

 

Confidence & Courage

 

Successful Forex traders believe in themselves and their abilities to learn and grow, to acquire more competence learning from a mentor. There is no reality only perception, the Matrix can trick you but you can have your own special Matrix inside your mind that empowers you with an unwavering belief in yourself!

Have the confidence and courage to stick to your plan and stay with your rules even if others are doing the opposite. Keep your vision (end result) that you can make it in the Forex market in your mind until you are successful in it.

 

If you experience a situation where you know exactly how a currency pair will go and have a sound trading plan, go for it! Sometimes people fail to follow their own good plans because all sorts of emotions get in their way, emotions like greed and fear. Stay calm and act with confidence and courage otherwise your planning, analyzing and information gathering will be totally useless to you.

 

You become more competent when you educate yourself about the markets and learn from successful traders. Self develop: "Know Thyself", get into the habit of monitoring your emotions and questioning your limiting beliefs so that your mind works for you and not against you. Don't take things too personally, if you make a mistake then consider it to be valuable feedback so you become more successful, never a failure!

 

Patience & Smart Persistence

 

An Indian wisdom says: "Life is always right!" we say: "the market knows much better than you do!"

Learn to listen and read the signs the Forex market is giving you. Learn how to wait, observe and only enter a trade when it is the right time to do so, before you can reap the profits.

 

It can be hard to wait before your Forex trading screen and not jump into action but The successful FOREX trader will enter a trade according to the direction of the prevailing trend or will wait until a new trend shows up and establishes itself. The waiting ranges from a few hours to days or even weeks before a winning trend appears.

 

even if you day trade and are not a long-term or position trader, you still are well advised to keep impatience from ruining your profit chances. Also be patient means you stick with winning trades. But be most impatient with losing trades.

 

Practice "Know Thyself" and continue learning your Forex trading from the best and we are sure you will be a successful Forex trader. You will be on the path of Neo, the One himself!

by Karima Begag

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The 7 Undeniable Rules of Forex Trading

Before we go into 7 rules of Forex Trading, that have been approved by a number of full time and successful traders, I'd like to narrate this story.
 
There was a lion, a donkey and a fox all keen to go out rabbit hunting together. After a productive day of hunting, the three of them sit around the pile of rabbits and the lion asks the Donkey, "Mr Donkey, would you please divide the pile into equal shares for the 3 of us?". The Donkey obliges and counts the rabbits into three equal piles for each of them. The Lion immediately roared and pounced him. He then piled all the rabbits on top of the donkey and asked the Fox "Mr Fox, would you please divide the rabbits up evenly between us?".
 
The Fox takes out 1 scrawny rabbit from the pile and puts it in a pile for himself then say "There you go, Mr Lion, that's your pile" pointing to the large pile of rabbits. The lion says "Mr Fox, where did you learn to divide so equally?" and the fox says "The Donkey taught me."
 
The moral of the story is to learn from others' mistakes. Now we proceed to our 7 rules. These are for you benefit as mentioned earlier, from experienced, successful traders.
 
Rule #1 Never risk any more than you can afford to lose, you will lose money, all traders do, make sure you're not sacrificing anything else important in the process
 
Rule #2 Never risk any more than 2% of your margin trading account on a simple trade. For mini account holders, 2% of $300 would be $6 so realistically you would need around $15 so you can make this 5%. As soon as your account size is big enough, make this 2%.
 
Rule #3 Always use a stop loss order. If you haven't figured out where your stop loss order and limit order should be at the start of your trade then you shouldn't be trading.
 
Rule #4 Know your exit point before you enter a trade.
 
Rule #5 Demo Trade First: Become successful with paper trading when there's nothing on the line before you open a real account.
 
Rule #6 Take a breather when your equity has taken a dive.
 
Rule #7 Don't let your emotions call the shots: Stay cool, calm and collected. Patience and a clear head will win the game.

by Sorna Devadas

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