Trade Exit - How To Cut Losses And Let Profits Run
Cut your losses short and let your profits run. This is the essence of your trade exit rules.
Cutting losses short
A protective stop protects your trading capital, it is your initial trade risk. Before a trade is even entered your should know where your protective stop will be - this is your maximum loss (barring any slippage on the exit). There are many different ways to determine a protective stop on a trade:
Set dollar amount - Say $500 on every trade
Percentage retracement - Say 10% from the entry price
Volatility - A percentage of the average true range of the previous x bars
Moving Averages - the opposite of the moving average entry
Channel breakouts - the opposite of the channel breakout entry
Based on areas of support and resistance stops
Time - If a position is not in profit after a certain length of time then it is exited.
Letting profits run
An effective exit technique is also required to allow a successful trade to make the most profit possible and give back the least amount of it.
Usually a trailing stop is employed to achieve this objective. A trailing stop moves to lock in profits as the trade moves in the traders favour, it should never be moved backwards. There are many different ways to calculate a trailing stop:
Volatility - the stop is calculated as a percentage of the average true range of x periods.
Dollar - A set amount determined before the trade is entered.
channel breakout - exit a long position at the low of the last x bars.
chart patterns - ie move the trailing stop behind each consolidation as it forms.
Other forms of exit are:
Time Stops - A trade is exited after a certain length of time no mater what. A day trader, for example, will always exit at the market close.
Targets - A limit order is placed to exit a position at a pre-defined profit objective. However this tends to break the rule of letting profits run and usually reduces the profitability of a system by cutting short the best trades.
Tim Wreford runs Online Futures Trading, a website that provides information and resources for traders. Tim also provides a free day trading system, the results of which are updated daily on the site.
Day Trading Course or Day Trading Technique Seminar: Learn Day Trading Education
Profitable day traders recognize that momentum trading is among the fastest & most effective ways to harvest BIG piles of cash in the stock market.
Trade Entry Techniques
Most traders tend to concentrate on pinpointing the perfect entry for a trade. However, in reality the entry price is just one part of the equation. The common entry techniques are:
A Fools Game
I received an email this week with a question (below) which caused me to think about the wisdom of pursuing trading as a career. Regardless of your trading time span, the skills and concerns of active short-term trading are relevant to all market particpipants.
Financial Crises, Global Capital Flows and the International Financial Architecture
The recent upheavals in the world financial markets were quelled by the immediate intervention of both international financial institutions such as the IMF and of domestic ones in the developed countries, such as the Federal Reserve in the USA. The danger seems to have passed, though recent tremors in South Korea, Brazil and Taiwan do not augur well. We may face yet another crisis of the same or a larger magnitude momentarily.
Crisis of Confidence in the EU
The European Union (EU) constitution was dealt a double blow, first by a French "no" vote on 29-May and then by a follow on "no" from the Netherlands on 01-Jun. To add insult to injury, one low level Italian diplomat quickly called for a referendum in Italy to decide if a return to the lira was warranted. Additionally, Prime Minister Tony Blair, who took over leadership of the EU on 01-Jul, indefinitely postponed the British referendum on the EU constitution.
Day Trading - Moving Averages vs Support and Resistance
When day trading the SP and Nasdaq futures, do you rely on your moving averages more than your support & resistant areas?
Internet and Computer Systems in the FOREX Business
With every passing year the interest in electronic trading is bigger, more especially trading shares and currency through Internet. A new profession came forward ? this of the currency dealer. The appearance of this profession was caused by the full force of development of Internet, which enabled the exchange business to be carried over at home or at the office. The electronic platforms offered by banks and investment brokers enables all of us to go in the sea of the financial markets and to start living a difference and unknown by this moment way of life.
Forex Signal Services
What are Forex signals? Forex signals are paid services offered by some brokers and independent Forex annalists. Companies that offer forex signals monitor and analyze the market for you, providing you with their data via desktop alerts, email or even SMS and pager alerts.
Forex Options Market Overview
The forex options market started as an over-the-counter (OTC) financial vehicle for large banks, financial institutions and large international corporations to hedge against foreign currency exposure. Like the forex spot market, the forex options market is considered an "interbank" market. However, with the plethora of real-time financial data and forex option trading software available to most investors through the internet, today's forex option market now includes an increasingly large number of individuals and corporations who are speculating and/or hedging foreign currency exposure via telephone or online forex trading platforms.
Welcome to the World of Currency Trading
Indeed large multinational and individual banks and other major financial institutions have dominated FX trading (also known as Forex trading), but there is a paradigm change in the nature and type of investing. According to one estimate, in the new millennium, there are over 6 million online investment accounts, up from 1.5 million in 1997. As a result, start-up firms now compete directly with financial institutions to serve investors in the new technologically driven economy, and the clear winner is the customer. The competition between the brick and mortar institutions and the Internet-based companies has dramatically lowered the costs of investing, and empowered the individual investor to take control of their own investment strategy in Forex trading.
Forex Market Overview
"FX" is an abbreviation of "forex" or "foreign exchange." Foreign exchange is the largest and most liquid market in the world trading approximately $2 trillion every day (that's over 30 times the daily volume of NASDAQ and NYSE combined). The forex market is a cash interbank/interdealer market. In simplest terms, this means the foreign currencies traded in the forex market are traded directly between banks, foreign currency dealers and forex investors wishing either to diversify, speculate or to hedge foreign currency risk. The forex market is not a "market" in the traditional sense due to the fact that there is no centralized location for fx trading activity and, therefore, trades placed in the forex market are considered over-the-counter (OTC). Forex trading between parties occurs through computer terminals, exchanges and over telephones at thousands of locations worldwide. CFOS/FX clients can trade through online forex trading platforms and/or over the telephone directly with a forex broker on our trading desk.
Where to Get Forex Training
For those of you who are interested in forex trading, you may want to start off by getting some good forex training. Forex training is a necessity for anyone with this interest. This is because a lot of money is involved in forex trading. If you don't get some forex training, you are bound to lose a lot of money.
FOREX - Where Fortunes Are Made Everyday
The Foreign Exchange Market ? better known as FOREX - is a world wide market for buying and selling currencies. It handles a huge volume of transactions 24 hours a day, 5 days a week. Daily exchanges are worth approximately $1.5 trillion (US dollars). In comparison, the United States Treasury Bond market averages $300 billion a day and American stock markets exchange about $100 billion a day.
A broker is any person or firm that charges a fee in exchange for executing trades for a trader. A Forex broker does not charge a commission for placing a buy or a sell order the way a real estate broker would charge a percentage fee of the total price of a sale. A Forex broker is paid according to the spread ? or the difference between the trader's bid for a currency, and the seller's asking price for that currency. Usually this spread is less than 0.1% or ten pips. (Pips are the smallest movement a currency can make on the Forex. Pips are commonly called referred to as points.) The lower the spread, the less a trader pays a Forex broker for a trade.
E-currency Exchange Trading
If you are reading this article you are probably one of the many people who have spent countless hours searching for unique ways to make money on the internet. Very few people have gone on to succeed and most have failed miserably time and time again.
6 Critical Factors For Successful Trading
Success in any profession can be broken down into a number of critical factors. Trading is no different. Does your trading tick all 6 boxes or are there any areas you need to work on:
Why Demo Account Performance Is Often Better Than Real Account Performance
Over the past several years, the popularity of online currency trading has grown substantially. Each day, online FX brokerage firms attract new investors - each of them lining up with a glint in their eye, lured in by promises of easy money. Most of these companies allow you to sign up for a free demo account which lets you place mock trades using their trading platform to get a feel for the excitement of currency trading. In the casual world of free demo accounts - many young traders find they are able to garner impressive profits without a significant amount of effort. It almost seems too good to be true. But transferring this success from a demo account to a real account is far less common. Why is this? The actual trading platform behaves the exact same way, the market doesn't care whether you're a demo or real trader - so what is different? It's you who has changed. Not your personality, not even your trading style - but the factors that affect you are different.
Writing A Trading Plan
All professional traders have a trading plan. Trading futures is a zero sum game and those with a plan (and the discipline to apply it) will succeed over those that have no plan. A plan details the particular market anomaly that you intend to exploit - your edge. Human emotion creates anomalies - essentially, the fear and the greed of those that have no trading plan.
Advantages of Trading FOREX Over Stocks and Commodities
There are many advantages to Trading FOREX as your main income generator. Let's start by something that may be worrying you already.
Day Trading Success- The Key Is Survival
Most new traders tend to focus just about all their time and energy on finding nearly perfect "setups", but trade setups, even very good ones, are *not* the key to successful trading. It's the *way* you trade your setups that keeps your losses smaller than your gains. And this is the single most essential key to trading success. To me, the process of limiting losses is more than just money management...it is survival.
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