The Cardinal Rules of Currency Trading.

CUT YOUR LOSSESS

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.

LET YOUR PROFITS RUN

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 http://forexcentral.googlepages.com

'Stops' are Risk control and Profit management tool in currency trading.

Stops are 1) Risk control tool 2) Profit management tool.The first protective stop (stop loss) is the initial risk control tool.Placing a stop loss limits our losses to a predetermined level in the event of an unfavorable move in the currency markets which often occurs in currency markets.How much you want to lose is a money management decision. Keeping a planned loss below 2% of your equity is a good money management rule.'Market goes your way'.You move your stop loss to entry point, then the stop now becomes the profit management tool.You are now holding a risk free trade, continue to let the profits run until your objective is reached.If something changes you simply exit the trade with what you have in it at that point.Your profit potential improves when you allow the market to behave as it needs to move on the way to your objective.You should also be aware of the negative characteristics of the stops.The number of profitable trades is sometimes reduced since these stops may allow modestly profitable trades to turn into losses .Also occasional large retracement in open trade profits can make the use of these stops quite difficult psychologically. No currency trader enjoys seeing large profits reduced to small profits or watching profitable trades become unprofitable.Your trading capital is your life blood in currency trading.Hence your first goal is to protect your 'currency trading capital'. Your second rule is only 'to maximize your profits'. Good trading for all readers.Muraleedharan http://forexcentral.googlepages.com

Trading Plan for currency Trading.

Your trading plan consists of your entry , stop loss exit , profit target exit and risk to reward ratio.You have a set up you trade and entry trigger signal.Before entering itself you should plan for two exits. One is a stop loss exit and the second is a profit target exit.Your risk to reward should be 1:2.5 for swing trading in my opinion.Imagine you have an entry signal where your stop loss need to be placed 2 dollars and your target is only 1 dollar. This is a high risk condition and you should pass on the trade even though you have an entry signal. You should wait for low risk entries.When a trader becomes risk oriented that is the stage in which currency trader can pull out consistent profits from the market.If you have multiple trades you can plan for two profit target exits one with 1:1.5 risk to reward ratio and move the stop loss to entry point for the other remaining position to let the profits run.By moving the stop to entry level you have cut your lossess. Here you have incorporated all the three simple rules of trading in your plan ie 1)Cut your lossess 2) Let the profits run 3) Trade selectivity.You have become risk oriented and you take only selected low risk entries.Muraleedharan http://forexcentral.googlepages.com