Learn How to Use Stop Loss and Take Profit Your Forex broker receives an order from you to close the position at a predetermined price. Then, you can lock in profits when a specified price level is reached using take-profit. Because of this, SL/TP is employed to close out the trades, preferably in a proper …
Learn How to Use Stop Loss and Take Profit
Your Forex broker receives an order from you to close the position at a predetermined price. Then, you can lock in profits when a specified price level is reached using take-profit. Because of this, SL/TP is employed to close out the trades, preferably in a proper manner and at the appropriate time. Diverse methods complicate the decision-making process while also presenting new possibilities for the trader.
Although it is not always the case, it’s common for books and articles on trading to refer to a stop-loss order as a “limit order” that “limits your losses”. The problem is that no one actually does this in practice. If you wait for a reversal in price, there is no point. As a matter of fact, “I am brave and can hold on to a greater loss; I am not terrified of a minor loss.” If you’re thinking, “If I set a restriction, will the price immediately go back up?” Is this correct? As a result, placing a stop-loss order is a bad idea.
The concept of taking profit is presented as an enigma. “Making a profit or achieving a profit goal?” Assuming that the gain can be more significant, and you intend to get more money back, why indicate what price the trade would be closed? Set a Take Profit at 2/1 or 3/1 of the Stop Loss value in the early stages of the trade. And once more, “yes-yes, it’s not terrible for a start, I agree, I’ll set a Take Profit at this distance, and I’ll see what happens next…”
Moreover, few are willing to confess that they don’t know why this is the case. Why does it have to be this way? “But why should the Take Profit be set at such a distance?” a trader wonders after reading this advice. If the price doesn’t reach the Take Profit, is there something I’m doing wrong? It could be that the Take Profit was hit, but the price continued to fly “into the desired direction,” and therefore, the trader regrets, “I shouldn’t have limited the profit; I could have held the deal a little longer.”
Because of this, you can say goodbye to your risk management even if you’re trading the proper position size because of “I’d rather wait for” and “Why is the Take Profit at this level?”.
These ambiguous regulations of someone else will eventually lead the trader to abandon them.
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