- February 2017
- Posted By Ninoslav
- 0 Comments
Everybody speaking about money management, ok it is very import theme, and I believe that a kids now that in forex is main rule never risk more than 2-4% account trading balance per trade. It is ok, and I agree with that.
But what is about trade management? No one do not mention that. Once you enter in trade how to manage that trade, when to exit from trade, in any case if you winning and if you losing. It is very import part of forex trading what no one do not mention to you, or even tell you what to do.
So, let say that you have some of your trading system what determine you when to enter in trade. Now you system trigger trading time and you are in trade. Like always it happen it is like that someone watching you and your trade start to go in wrong direction. First what you think is what is going now, all indicators, stuff, news, predictions, analyses… show that I have trade now, why price do not go in my desired direction?
Next question will be when to exit from trade. Of course all of us are human and emotions will start to show up immediately. First you will be angry because you missed trend, then you will say I will not lose money it must start to go in my desired direction any moment. But like it happen in most case price continue to go in wrong direction what causing more and more floating loses. You still thinking what should I do now.
First and wrong movement what most traders will do is, price will reverse, I will end this with profit. How time passing your floating lose is bigger. Now, you admit yourself that you have miss trend and next think is what should I do with this open trade.
Like most of traders you will still think that trade will reverse at least something little to cover floating loses and that at the scene come your first mistake, I will open double lot size in same direction it will faster cover this floating lose and bring me profit. In that moment you are not trader any more, you are gambler. You have just start to use Martingale system.
What is Martingale?
A gambling system of continually doubling the stakes in the hope of an eventual win that must yield a net profit.
“Caught in such a trend, living a life that matches the pace and the cost of change becomes a gamble on martingale terms – the stakes are doubled after every loss.”
Same that you are in casino playing roulette and put all in same color in hope that it must hit your desired color soon or later and you double your stake more and more till the moment you stay out of funds (if you do not have unlimited funds, and casino do not have limited max bets).
So, that Martingale is good, we will not have any single casino. It will be non profit with business.
You made mistake, you are in bigger floating lose now.
Open one more trade in opposite direction. Ok, now you are in one more trade in opposite direction. You fixed your floating loses for a while. Next you start to watch for new trade what will cover this floating loses and bring you at least zero profit. Ok, let say that it is better than using martingale but what will happen if your hedge trades stay over night? Brokers swap fee will made your floating loses bigger, if you could not handle those trades in same day, and if you did not made some new trade what bring you profit what will cover floating loses. Lot of stress and you start with one trade only at the begin of your trading day.
You again made mistake, you enter in circle where is exit very far away. Not good idea at all.
Maybe most painful but most effective decision. You have miss trend and exit from trade. Sure you made some loses, but with next trade it could be better.
Whatever system that you use for trading ALWAYS USE STOP LOSE, if you are not sure in your system first try with some demo accounts, of course demo account should be same size like your real account, about that I will write in some other post, now we stick for trade management.