Trading is an art and not many traders can succeed in trading the financial instrument. Majority of the traders are struggling hard to make profit consistently. In fact, 95 % of the traders are losing money. Most of them are losing money due to lack of their trading knowledge and confidence. If you look at the professional traders in Australia then you will notice that most of them are using advance money management technique to save themselves from the trading loss. You might find it really hard to deal with the dynamic nature of this market but if you gain enough knowledge then securing your profit will not be hard. In today’s article, we deal with some advance money management tips which will help us to save your investment.
Why should you use stop loss?
Forex market is extremely volatile in nature. The professional Aussie traders use the use the market volatility to trade profitable trades. But even after doing all the math, the market will often turn against you. You might have enough trading capital to support your trade but do you think that you can withstand the dynamics of this market? The simple answer is no. The market can stay irrational which can cause you to go insolvent. For this very reason, the expert traders always use a protective stop loss to minimize their trading loss.
How to set the stop loss?
There are many ways that you can use to set your stop loss. Setting your stop loss is directly related to your trading system. If you are new to this market then might not have any specific trading system but the over the period of time you should develop a unique trading system. Your trading system must take care of the advance money management system or else you are not going to make any real progress.
Some professional traders in the CFD trading industry often use the price action signal to set their stop loss. But if you want to use the candlestick pattern to set your potential stop loss then you need to learn about price action trading strategy. This is really very easy but you must have a strong concentration in this field. When you spot any reliable candlestick pattern simply use the wick of the candlestick to set your predefined stop. If you execute short order then put your stop loss few pips above the bearish price action confirmation signal. Similarly, for the bullish trade setup place your stops just below the tail of this candlestick.
Trailing stop loss
This is where things get a little bit interesting. Trailing stop loss is used when the trade goes in favor of you. For instance, if you execute the long order in the EURUSD pair then you can move your stop loss to positive 50 pips if the market goes 100 pips in favor of you. But placing the trailing stop loss using fixed number is not a good idea. You need to learn about the minor support and resistance level to place logical trailing stops.
Let’s say that the market has breached a minor resistance level in the higher time frame. So you need to move your stop loss to the break-even level so that you don’t have any risk of losing money. Once the market breaks another key resistance level then use the-the previous minor resistance level to set your stop loss. This is how the trailing stop loss is executed in this volatile market. But using the trailing stop loss features will not be easy for the very beginning. You need to have clear knowledge about the support and resistance level.
Using the trailing stop loss features is one of the key ways to succeed in this market. You have can greatly reduce your risk exposure in the financial industry simply by using the trailing stops. If you are completely new to this market then you need to demo trade this market to a clear idea of the market dynamics.