Lesson 8 – Forex Stop Losses – Risk Management

AdminBy AdminNov 10, 20170

In lesson # 7 we have made an example of practical operation on Forex, highlighting the effects of leverage which allows us to negotiate on a number of securities greater than that on which we could negotiate with our actual budget. This element makes it much more interesting online Forex, exciting and productive. The results are tangible immediately, for all types of users. Whatever it invests little or much, the revenue potential as a percentage of Forex are absolutely relevant and can be appreciated from the early operations. However, to safely operate, even now, there are two modes: real or demo with stop.

Forex Safe: Stops

Forex Safe: Stops

Always in our lesson 7 on leverage in practice we mentioned the stops (stop limit and stop loss) but we have postponed their depth in a later lesson. In this lesson, so we will explain what they are and what good are the stops of the Forex, which are however used for any type of market, in addition to currency. Whether traded on currencies, whether traded on stocks, commodities, ETFs or indices, the stop will be always available to make your trading more secure.

So We Come To The Point: What Are The Stops?

To “stop” means a mechanism that signals the trading software to stop (stop, to be precise) so that we can put an end to the losses or gains. Let me explain better:

Setting the Stop Loss will set a quota under which the price of the asset (currency pair) in which you invest you do not want it to drop. For example, if you invest on EUR / USD and is 1,300 and you want to protect yourself in case this falls too much, you could set a Stop Loss at 1.2900 so that if the currency falls further, the position is instantly closed and then sold. This may save you in case there are sudden declines.

By setting the Stop Limit you can set a quota which will “settle” to sell in order to profit. For example, always taking as an example the EUR / USD which is 1,300 (height at which you buy) you could set a Stop Limit to 1,320 to allow you to profit of 20 pips multiplied by the amount invested.

As you can well understand, these are two fundamental operations, both in terms of decreased risk (risk management), both in terms of earnings management. These are two examples of automated trading that lets you stay safe even if you can not personally follow and constantly your operations.

The Demo Account

The Demo Account

If it comes to safety you can not mention the demo account, although this discourse has already been presented and will be repeated in the future. It is a key component of the path of the learner but also for professionals, since the Forex demo account allows you to put into practice their strategies to ensure their effectiveness. Adopters of particular systems or techniques, not ashamed to even wait several weeks to test them to the fullest. The demo account, free of charge, is certainly the best method.

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