The Need For Stop Loss

Here at The Dynamic Trader we have seen hundreds of individuals wanting to be traders.

For some reason many new forex traders we have come across seem to find one aspect of trading dull. We are talking about money management and like it or not, money management play an extremely important part of trading and to ignore it is to admit defeat before the battle even begins.

Money management not only restricts your losses but it can also provide you your profits.

Before taking a trade you need to stack the odds in your favour. This is something we go through on our webinars and forex mentoring sessions and is much too vast a topic to explain in a few paragraphs here. Once the odds are stacked in your favour then you need to identify your entry point. After that an exit point needs to be established and this is where the stop loss comes in to action. Your stop loss is your safety net and very important in limiting your losses and giving you the ability the trade for another day.

The positioning of your stop loss is as important as when to enter a trade. We have seen many traders scared of possibly having a big loss that they place the stop loss only a few pips from the entry point. This scared method of trading inevitably leads to more losses than profits and finally a disgruntled trader.

Stop loss levels are very important and unless a trader uses them correctly they will only cause losses by a trade taking out your stop and then reversing and going in the direction you were hoping for in the first place.

Hopefully those of you we at The Dynamic Trader have mentored are applying our strategies for not only entries but also stops.

Visit our other Dynamic Trader blog at www.fxcps.com/blog for further forex information and daily currency analysis.

Good dynamic trading...

Forex Analyst
Javid Shaik