Thursday, January 8, 2009

The Cardinal Rules of Currency Trading.

Decide your trading float, set your maximum loss,Calculate your stop loss, calculate your position sizing before you enter into the trade .You should 'plan your trade and trade your plan' with utmost discipline to generate consistent profits from currency trading.Once you have set your initial stop loss, you have ensured a mechanism to cut your losses short.
How do you handle your profits, once the trade moves in favor of you? There are two types of exits. The stop loss exits and trailing stop exits.Trailing stop is the one you implement once you are in a profitable situation.Trailing stop losses will allow you to follow a trend as it develops and exit the position at trailing stops or at the point (Target) where you can realistically maximize your profits. You should have a way to look into your profits.Profit management is equally or more important in currency trading.This form of trailing stop is adjusted on a periodic basis according to a mathematical formula that keeps it moving upwards as the price moves upwards.The key to trailing stop is that you need to continually make adjustments to it,make sure that the stop is moved in your favor.With a trailing stop loss in place you will be able to let your profits run and let your trading system deliver the maximum profit.Stay with the trend as it develops and let your profits run.Then when the price turns you can exit.You have to monitor your position.Theoretically these lines look very simple.But when you are in the trade you will find it difficult to manage your positions.But practice over a period in the right way makes you comfortable which appeared uncomfortable in the beginning.Good trading readers.Muraleedharan

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