Hi everyone I’m new here and new in Share Market. I just started studying to understand those charts and realised that if Loss is protected then definitely Profits will be achieved ultimately. But what are the best options/techniques to protect Losses? Please advise in simple English as I’m Layman with all those ‘Terms ‘. Thanks
A STOP LOSS is used to try to protect your risk.
A Trailing Stop is also used
If you move your Stop Loss After your in Profit then Yes But you have to be in Profit first
As when you Open a Trade you are at a loss Straight Away.
If you want simple English, understanding the difference between “loser” and “looser” (and the difference between “lose” and loose") is a pretty good place to start.
As you’re still learning, the best way to reduce losses is by risking less on each trade (around 0.5%). Only after you make consistent returns on your trades should you consider increasing the risk. As of now, concentrate only on finding a strategy which gives you consistent returns. Limit your risk and make consistent returns, profits will take care of themselves.
That’s easy
in lamen’s Terms
DO NOT TRADE
if you must trade
TRADE SMALL
before you trade
LEARN TO TRADE AND PRACTICE ON DEMO UNTIL YOU CAN TRADE
that’s it
Hey MasterScalper: Thanks for the reply but how do I limit 0.5% limit?
he asked to be advised in simple english. thereby he stated his english is bad. whats there so hard to understand sherlock?
Hi LT… When someone states a percentage of risk, they are referring to your actual account size.
ie: If you have a Live or Demo trading account with your Broker with say $500 available. You limit your risk to 0.5% of this amount ($2.50), theoretically allowing for 200 losing trades before your funds are exhausted…
Generally trading risk is set at 0.5% - 1.5% which changes the value of your risked amount. You can determine this level dependent on your risk appetite, obviously the lower the better…
It also has a controlling effect of the Lot sizes you should be applying to each position. Once again, ie: you wish to place a trade on say the EURUSD of 0.01 lot size… your Stop Loss will be set to no more than the value of $2.50 (or ~19 pips).
You can set your Take Profit (TP) anywhere within reason (Applying TA) but a good starting point is 2:1 RR (Risk to Reward). This shows you that your TP should be set to double your Risk, in this case a $5.00 profit (or ~39 pips) which allows plenty of room for the trade to breathe.
The reasoning behind the 2:1 RR comes back to account preservation once again… with a RR of 2:1 you only have to win 40% (4 out of 10) of your trades to remain at break even, thus keeping your $500 intact…
So in the scenario above, with your risk set at 0.5% of your total account value…has some bearing on your whole trading plan.
Edit: See Tom’s post below on how to apply it in a Chart with TA situation. Hope this is of help…
You can use technical analysis on the chart to see where you could set a stop-loss.This should be at a price which if hit would suggest that the market is probably not going to go in the direction you wanted. Taking your maximum acceptable loss as a % of your account, calculate the position size based on this against the distance between entry price and stop-loss price.
e.g. In long-term trading, you believe a price is going to go up from where it is now, 6000. The chart shows you that if price falls to 5683 then the TA suggests price is more likely to fall further than to go back up to 6000 and then higher. So your stop-loss should be 317pts below your entry. If you can risk $0.1 per point, this represents a possible loss of $31.7. If $31.7 is 0.5% of your account, that will be fine: if its more than that,you can either increase your risk % or wait for another opportunity.
Thanks for the clarification Trendswithbenefits
There are various risk management tools especially hedging techniques, futures, forward, options, SWAP all can be used to hedge against risk. Especially futures and options can be used to minimize risk in the equity market. Again, stop loss order, limit order or selling shorts etc. all are here to earn good profit but keeping risk at minimum level.
Hi Nathaniel_Imas: thanks for the message. Can you please elaborate a little more about Hedging Techniques ?
Thanks tommor
Hi LT… This came up a few months back, so have a read through this thread…
Para 6. Say you have a buy position and it starts to go bad and the price pulls back to the entry point of that buy, you estimate the price to pullback further… You open 2 sell positions at the original entry point and of equal lot size to the buy (Say buy is 0.05) you now have two sells at 0.05. So as price moves downward against your original buy position, you have one position which is hedging the trade (locking the loss) and the second position attempting to make a profit. So if bo…
This will give you a rough idea of what Hedging is and how it can be applied…
Hi Trendswithbenefits: thanks for the topic. Cheers