To Control risk on Forex Market...

[dekac]

Hi Traders

To control risk



One of the most important jobs as a day trader is to control your risk exposure. Sure, controlling risk is a concept you must use in any type of trading, however in day trading you must look at this issue from a different angle. Since your job is to capture various price swings during the day naturally your profit objectives will be much smaller then of a swing trader (who places a single trade aiming for a much larger profit objective).

So, when placing several trades during the day it can be easy to “drift” away from your pre-determined stop losses. A common (very common actually!) day traders thought is “if I extend my stop loss just a bit I hope the market will turn around”! Hope is one of the trader’s biggest enemies.

These little extensions of stop losses add up and suddenly without noticing you are losing more dollars per trade than planed making your risk/reward ratio turn against you...

[FerruFx]

Good post.

Originally Posted by dekac

Hope is one of the trader’s biggest enemies.

Hope is the reverse side of discipline.

Originally Posted by dekac

These little extensions of stop losses add up and suddenly without noticing you are losing more dollars per trade than planed making your risk/reward ratio turn against you...

Never move your stop loss ... unless in the right direction (in your favour!).

Again, this is D-I-S-C-I-P-L-I-N-E.

Accept your loss.

FerruFx

[dekac]

Hi Traders

This principle is key for any type of trading but particularly for day trading...

[sweetpip]

Originally Posted by FerruFx

Never move your stop loss ... unless in the right direction (in your favour!).

Again, this is D-I-S-C-I-P-L-I-N-E.

Stop-Loss help traders control risk by capping losses.. So it's not good to take the risks on moving extensions..

The general rule is to be discipline! Discipline includes hitting your stops and not following the temptation to stay with a losing position that has gone through your Stop-Loss level.