Tag Archives: Stop

General Business

Your Stop Loss Is Critical When Day Trading Futures

Stop loss orders are great insurance policies that cost you nothing and can save you a fortune. They are used to sell or buy at a specified price and greatly reduce the risk you take when you buy or sell a futures contract. Stop loss orders will automatically execute when the price specified is hit, and can take the emotion out of a buy or sell decision by setting a cap on the amount you are willing to lose in a trade that has gone against you. Stop loss orders don’t guarantee against losses but they drastically reduce risk by limiting potential losses.

With my system the only stop I use is what I call an emergency stop. My stop loss is automatically made when I make my initial trade at two points. It is only for emergencies, like news I wasn’t expecting, or anything that will make the market gyrate drastically and I never enter a trade without it. However I never expect to use this stop loss to exit my trade. I simply will not let the market move against my trade entry more than a tick or two. If I find that I exited the trade too soon I just reenter the trade but if the trade continues to move against me I have saved the loss of one or two points per. contract. Usually I will only have to exit and reenter a trade one time if I have entered a trade to early. This means I only lose a small commission per contract instead of fifty dollars per point- per contract, when trading the e-mini, and taking what many consider
a normal loss.

Trading the futures markets is a challenging but profitable opportunity for educated and experienced traders. However it is not easy, without a great trading system, and even traders with years of experience still incur losses. Finding a good trading system and trading in small increments with an emergency stop loss in place will allow those relatively new to futures trading to be successful. Once you have learned the skills you need to trade with consistent profits it will not be a problem but until that time it is absolutely critical that you do not take unnecessary losses. If you are new to trading futures you should never trade until you have a mentor with a trading system that gives you consistent profits.

A great way to protect profits if you have not established an exit strategy is the trailing stop. The trailing stop loss is an order that is entered once you enter your trade. Your stop price moves at a specified distance behind the market price. Trailing stops are raised when a price rises, in a long trade, but will remain stationary when it falls. Trailing will only occur when the market price moves in favor of the trade to which the order is attached. The trailing stop order is similar to the stop loss order, but you use it to protect a profit, as opposed to protect against losses. Trailing stops are designed to lock in profit levels and they literally trail along your increasing profit and adjust your stop loss levels accordingly. Often traders will find tailing stops confusing because they change them while in an open position. This is not a wise practice, and should be avoided. It is an indication that you are not sure of your trade and if one is not sure of a trade it would be wise to exit immediately. Trailing stops are ideal because they allow for further profit potential to enter due to momentum, while limiting risk. Trailing stops are an important component to a trader’s risk management unless they have an exit strategy in their system that might serve them better.

The market order is the simplest and quickest way to get your order filled to enter a trade or to use as a stop loss. A market order is a trade executed at the current market price and they are often used to exit trades to ensure that the order has the best possible chance of execution. A market order to exit is simply an order used to exit the trade immediately. Be aware that in a fast-changing market sometimes there is a disparity between the price when the market order is given and the actual price when it is filled.

Stop loss orders are used to exit trades, and are always used to limit the amount of loss, but some day traders use them as their only exit, while other traders use them as a backup exit only. If one uses them as their exit they will risk more than is necessary and might want to find a better system to trade. Stop loss orders allow you to define your risks before you open a position and in my opinion that risk should be minimal. Stop loss orders are one of the easiest ways to increase your chances of survival when trading commodities and futures and they are a powerful risk-management tool.

General Business

Stop Losses

Every trader should have a risk management plan in place before they start trading. A stop loss is a simple risk management tool that every trader should know and be able to use. There are several ways to implement stop losses into your daily trading. Depending on your goals and trading plan, not all stop loss methods might be the right one. Here we look at several stop loss methods so you can figure out which one is right for you.

A stop loss is a handy risk management tool that many traders use in their day to day trading. A stop loss helps to limit risk because it helps the trader see a limit that they have set for themselves. It is generally a number that a trader sets that tells them when they should exit a market. There are a few different ways to set this number.

The easiest way to use a stop loss is to use a fixed dollar amount. For example, a trader trading the E-mini S&P 500 might set a loss of $200 for his trading strategy. If one point on the S&P 500 was equal to $50, then this trader would know to exit the market after four losses. Four losses would mean a $200 loss on the overall account, and when the stop loss was reached the trader would know to stop trading and evaluate.

Another way to set a stop loss is to set a percentage of price as your loss. This is very popular with stock traders. Here is how it works: A stock trader might set a 10% stop loss on a given stock. Let’s say this particular trader buys a stock at $100. Because they are using a 10% stop loss, their stop is set at $90. Now they will look to participate in a move. If they are wrong, they know that they are going to get out with a 10% loss.

Other traders prefer to set technical stops. This kind of stop can be based on support or resistance patterns in the market. Imagine you are looking for a market to move up and you see there is a support level. Using a technical stop would mean that you would place your stop just below that support level. This kind of stop would allow you to participate in the trade and move to the upside. On the other hand, if you were expecting the market to drop, you would place your stop just above the resistance level.

The final method of setting stop losses was invented by Markus Heitkoetter, CEO of Rockwell Trading. In this method, traders place stops based on percentage of volatility. This method is very popular with traders who look at the average daily range of a market. A trader using this kind of stop will look at the average daily range, take the seven day average between the high and low, the session high band low, and use these numbers to determine the stop loss.

Stop losses are one of the best risk management tools a trader can incorporate into their trading. Not all stop loss methods might be right for every trader, but every trader should find a stop loss method that works for them.

Forex Trading Articles

Stop Loss in Forex Trading

A Stop Loss order is placed to protect the trader from losing more money on a trade than they are willing to risk. A trader opens a position either long or short a trading vehicle. At the same time the smart trader will enter a Stop Loss order opposite the opening trade. If the first order was a buy, the Stop Loss will be a sell order for the same amount of units. This helps to keep emotion out of a trade or making it a hope trade. “I hope it quits losing me money soon” is a hope trade. Do Not Begin Trading without an order to protect your capital. Hope trades are for amateurs, and will cause only losses, be it in the stock market, the futures market or the Currency Market.

Although many traders do not use this method of trading, the traders that do use them are more likely to be winning traders in the long run. They have analyzed the trade and have a very good idea of how much risk they are willing to accept as part of the trade. If the trade goes against them, the Stop Loss will protect the capital and keep the loss at an acceptable level. Without an order in place, the trader has to manually get out of the position by putting in an order to close the position. This is where the good trader and the lucky trader part company. The good trader controls losses and the lucky trader just depends on being able to move when he is forced to move. This where the trade can turn into a hope trade and the trader lets emotion control the trade rather than logic. This is the easiest way to turn a small loss into a big loss. Do not be a fool and trade without Stop Loss orders.

Placing Stop Loss orders is an art form and there are considerations to be made. One is where to place it, perhaps at the level in which the trader first entered into the trade. Traders might prefer a trailing stop loss to protect a profitable trade. The trailing stop could be used as the trade makes money. Entering new orders and canceling the old order at the same time makes this a trailing stop. This can also be used as a way to further protect a profitable trade by closing up the current price level and the stop order price. Eventually the order will be triggered, but the profit may be greater than just getting out of the trade by feel. As with all trading, the idea is to use as little risk as possible and still give the trade some breathing room.

Stop Loss orders should be used at entry and then later to keep as much of the profit as possible. These are two very distinct and different uses of this valuable order. It means lower losses and more possible profit.

Remember that Forex Trading involves substantial risk as well as chance for substantial profit. Protect yourself with Stop Losses and other tools at your disposal, and trade wisely.

Forexpros.com

Disclaimer:
FusionMedia or anyone involved with FusionMedia will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Forex Trading Articles

The No Stop, Hedge Foreign Exchange Trading Grid Technique

This no stop loss, hedged Foreign Exchange trading Grid technique is now extremely popular due to the fact that same currency hedging gives a chance to transact with no stop loss loss order . This is exceptionally appealing to many Currency traders.

So how does it work:- In essence after you have sold and bought a currency (creating a hedge) you would decide a trading grid consisting of price levels above the current price and below the present price. These price levels are normally exactly the same range apart (say 200 pips). Each time the price reaches one of the price levels you would buy and sell the currency (thereby generating a hedge). You would also liquidate or close your positive transactions at that time. Sooner or later the amounts you cash in will be even larger than the cost of your open transactions (hedges) and you would liquidate all your deals at a net profit and then take a break or start all over again. In case this sounds overly basic for you there are a few excellent videos readily available on the Internet which explain these ideas in more detail.

As you can notice it is very mechanical and does not require any thought – just follow the rules. Because of this it make the Grid system an ideal automation system – you do however need to know the mechanics of the technique exceptionally well in order to determine the optimal grid size and currency cross pair to use.

This no stop, hedge, currency trading Grid system however remains one of the most misunderstood and abused forex methods around. This is due to the fact that the no stop, hedge Currency Grid Method is more of an investment technique than a trading technique. Moving from a quick day trading strategy to a long term investment technique is something tremendously few Currency traders can do. It requires such a paradigm shift in trading that day traders become impatient and reckless and lose their trading account tremendously quickly by adopting inappropriate grid sizes or using the wrong currency cross.

A fact that Forex traders can’t come to grips with is that you don’t need forex charts to transact the Grid system. Currency trading is almost totally based on fundamental and technical analysis that uses Currency charts to determine optimal trading entries and exits. Not the grid technique. If you know that you are going to be selling and buying (hedging) a particular currency at predetermined price levels no matter what, why would you need forex charts.

The investment technique uses some of the aspects (not all) of the dollar cost averaging investor’s use. If you invest at a certain price level and the price moves to a increased price level and you invest again, your average purchase price is lower than your most recent purchase price. As long as the price stays higher than your average price you are in profit. Likewise if you buy at a certain level and the price falls to a lower price level and you buy again, you have decreased your average purchase price and it does not need to go up much for you to breakeven. In the same way, the Grid technique trades until the cost of the hedges is lower than the earnings from cashing in the positive transactions.

By buying and selling at each Foreign Exchange grid level and also liquidating positive transactions the investor is moving closer to the point where at some point the total investment will probably be cash positive and can then be liquidated.

Forex Trading Articles

How to Create a Mt4 Trailing Stop EA

The launch of the MT4 platform for forex trading has made trading so much easier and accurate. Because of the MT4 trading platform and its accompanying MT4 Expert Advisor function, a trader’s job is made much easier as certain trading procedures can now be automated with mechanisms like MT4 trailing stop EA. The degree of trading system flexibility has now risen as the mq4 language of MT4 can be used fashion out additional automated strategies. The consequence of this is that a trader would have time for other tasks like finding better trading strategies instead of just observing the market all of the time.

A number of advantages are attached to having one’s own MT4 trailing stop EA. It helps to automate most of the tasks that would, otherwise, have been done manually. MT4 trailing stop EA assists a forex trader in the perfect execution of his trading strategy, and makes it possible for a trader to verify the workability of his trading strategy by doing back-testing against historical charts. It also helps him to think rationally when making trading decisions rather than to rely on emotions for decision making. There are more advantages of MT4 trailing stop than the ones stipulated earlier. The MT4 Expert Advisor puts a trader in a position where he would be able to learn the essentials and develop appropriate trading strategies fitting for automation purposes.

When it comes to discussions about forex trade management and exit strategies, most retail traders do not take long to lose interest in such discussions. This is how MT4 expert advisors comes into the picture to solve the problems through automation. But a trader would still need to put in a minimal effort to fashion out his MT4 trailing stop EA that would take care of all other things; entering and exiting forex trades at appropriate times. It would, however, cost some money to create the MT4 trailing stop EA if the trader does not have any knowledge of programming. But MT4 trailing stop is well worth paying for because of its usefulness. As some people would say, you have to invest a little money to make more money.

Traders’ communities provide another cheaper means of putting together a trade management EA. From these online communities, a trader can get expert views that they could use to put together a viable MT4 trailing stop EA. Through these communities, retail traders would find it pretty easy to have their own MT4 trailing stop EA developed and also make a little money by sharing with other traders in the community. You can easily learn from the experience of traders who are using trailing stop in their forex strategy and seek their opinion on which exit strategy is best to use in the current market.