Greetings to all trading colleagues in the world markets and those who are trying to learn this! Today we will talk about how we plan our deals. Or rather, how we calm ourselves down at the moment of making important decisions. Before opening a position, we analyze the market situation. Someone relies purely on fundamental data, while others use technical analysis. And when it seems to us that everything has been thought out, we make a decision to open a position. Many traders are so confident in the correctness of their trading decision that they ignore stop orders. There are, of course, trading strategies that do not use stops. Only not always good reviews about such a trade. And for novice traders, such strategies are complicated and cumbersome.
Trading 3 to 1
One of the most common misconceptions in Forex trading is that Take Profit should be 3 times larger than Stop Loss. No, it is, of course, good if you can trade with such a result. But it doesn’t always work. Many speculators do not quite understand what is at stake. When calculating to open a position, a trader first estimates how much profit he wants to get from this transaction. And then, based on the possible profit, it calculates where to place a stop. At the same time, everything is done, as stipulated in the unwritten rules, the stop is three times less than the profit. But this does not take into account at all the levels of resistance and support, both strong historical levels and local ones. Many earning traders do not comply with such an incomprehensible requirement, 3 to 1. It is not the stop-profit ratio that is more important, but the acceptable risk per trade.
Signal to open a position
Everyone is waiting for a signal to open a position from their trading system. One common mistake is common for novice traders. They do not work on signals from the vehicle, but “attract” them. For example, a trade is opened after a candlestick crosses a moving average and anchors it. But at the same time, it is stipulated that the candlestick that has broken through the MA must be strong, have a large body and small shadows. This moment is often ignored by those who “attract” signals. The main condition for them is the crossing of the moving average by the price. Each trading system has, in addition to conditions, also exceptions and recommendations. So this is exactly what, most often, not observed by beginners. But at the same time, they are confident that they are doing everything right.
Confirmation of a signal to open a position
If indicator trading systems are used, then confirmation must be sought among other trading methods. The same applies to other techniques. If a signal is received, you need to make sure that the price will indeed move in the right direction. But it often happens that if all the rules and conditions of the TS are observed and the signal is additionally confirmed, the transaction brings a loss. Opening the position, we were calm and confident that everything was thought out and everything was going according to plan. However, they did not take into account the fact that at the moment the price is close to a strong historical level. The received signal did not work out because the price was unable to break through the level. Do not forget the unpleasant moments of trading that happen during the release of important news. A clear signal was received, which was confirmed by other trading methods and a trade was opened. But at the time of the news release, the price with a sharp impulse turned in the opposite direction and flew away by several tens, or even hundreds of points. So everything cannot be thought out in trade.
Jul 23, 2021