FOREX TRADING TIPS 3
3.1 Types of orders to enter the market
The three most common types of orders are: a market, limit and stop. People get into a lot of trouble with the types of operations and which would be better and doubts of that kind.
The types of orders are adjusted more to the type of trader and strategy than to the type of active that we operate. According to our method, we will carry out one or the other. Yes, it is true that for example limit orders involve fewer risks because if they are well designed the price has to force a lot backwards so that the order is execute and if this order is executed is that we have entered with a good address in a recoil.
Anyway, we will make a small distinction depending on the types more common orders to remove from doubt those people who are not clear with what type of order to enter.
Orders to market: Are those in which the operator asks for offer price or demand at a certain time and it is executed at the price at which it is quoting that same moment. It is the most basic type of order and if level breaks are used whether they are maximum, or minimum can be a good type of entry. The risks of this order derive from the false ruptures that the institutional do to catch oxygen in the price. If we filter those false breaks, we can see how this type of input It is not so risky and it may be the one that best suits our type of trading.
Limited orders: this type of order could resemble a fly fishing in the sense in which we will only enter if a cheaper price happens to which we are willing to enter. What happens with this type of orders that, we should be very accurate at entry points either by measuring them by Fibonacci or by methods similar to estimate an entry point where the price could be reversed. This concept seems simple, but it is not and only if we are in a clear trend and with conditions of normal setbacks may be optimal entry.
The risks are logical and that is, the price stops the impulsive movement and turn in the opposite direction, so this will make our market position do not last more than a sigh. Of course, the cleanest entries by professionals they are made in this way, but only by those who have knowledge exhaustive of the ranges and the life of the asset they are operating.
We must try all kinds of orders to know which are the most they suit us and with which we feel more comfortable. You cannot say a priori that one type of order is worse or better than another, but that one or the other type fit more to our needs.
Stop orders: These types of orders are also quite simple because it is based on the principle of a single condition. This condition is that the price passes in one direction by our level to enter the market.
This type of order is very useful for when there are very relevant highs or lows, knowing that there are not many positions below or above that area that make the price turn. It is widely used by pivot traders and those that make breaks of specific planes.
This type of order is the one that best fits the natural operation of people by make considerations such as, “if it goes below that minimum it will go for the next since it is in strong trend “. The operation may not go well but at least it has been a rational entry and we will only need to have a
deeper knowledge about the asset so that our ratio of success is much older Thematic about price action is never like reading night.
3.2 Risk management
We will deal with this topic in a light way and exposing the more than basic rules on the matter.
- Never exceed the daily loss limit according to the portfolio: the only tool we have to preserve capital is the maximum daily loss. I have seen as many professional traders as they have lost 30% of their funds due to poor risk management and a conviction about a situation determined market that was wrong.
Those personal professional dramas or of whatever nature are common for the tenacity of maintaining an ego or a status. If the market turns strongly, it is not being correcting is that I was wrong, and we are still in time to be able rectify and put myself on the opposite side.
What we cannot do is skip the brake configuration to our taste, the brakes of a Formula 1 are powerful in the same way what should be for our operations.
- The more capital available, the less you risk: The common standard is a risk of between 10% and 5% of the maximum available capital per day. That amount is in many of the cases a savage for the amount of the portfolio and others if we talk about more derivatives.
It is advisable to operate only with 10% in derivatives and only of that 10 10% as maximum to risk daily. What happens is that operators with little capital are forced to risk more and that makes the losses are greater. Is better not to operate with small amounts because with a very high percentage before or Then you will see how some margin call some position. However, yes there is people who get this, but they are the least.
The already bulkier accounts exceeding 1 million euros commit between the 0.5% and 2% per transaction that if we transport it to euros it is an amount nothing despicable. If this is the case, let’s think about the risks that the retail operator runs very leveraged or with a 10% risk management per operation. That means probably in ten operations with bad luck we have to go back to start. We are not going to delve into risk management since it is a personal issue, capital and the personality of each operator.
3.3 Winning consistently is a state of mind.
Many will think about the curiosity of the subject to be treated, but it is evident that winning always must have a trick. In effect this is so, those who have kissed the Saint are those who visualize the price action, imagine how the following bars will be graphic, they have got up early to see how Asia has closed, they have weighed the risk of enter what can cost them and if the opposite happens.
The common pattern to almost all the winning operators is temperance, knowledge, tranquillity when they enter the market, humility and many other things that we could praise, but it’s not the time.
There is a concept about which books have been written and how to be in the area, and it means always being in the area of the balance where the market is tilted. There are people who manage to stay in the area for a long time and in the end, they burn or even others who can only caress her.
In both cases it is a mental state of zero worries about the vagaries of the market, because we will know what to do if it goes up, if it goes down or if it stays the same. Reach that moment in which we have the risks, the portfolio and the controlled emotions, is there when we can say that we are inside the zone.
Because trading is a long way, we may never hear those celestial chants of being in a sweet moment where all operations come out all right. This is because the path of the trader is long, hard and expensive and in addition to not they all get them regardless of the available capital.
This exciting activity could be equated to Formula 1 where speed, Tension, professionalism and intelligence shine in every corner. Another of the similar characteristics is that ONLY wins the first and that’s where we refer to 95% of FX retail operators lose.
It’s not because of taking courage away from anyone it’s just to show that this world is hard and that the Holy Grail does not exist nor the 100% returns in less from one hour. Only with our effort, dedication and tenacity do we will make a hole in this exciting world.
Once you operate on benefits the risks and the personal appreciation changes and we may no longer operate on losses in months It is a matter of preparing the mind, visualizing the price, operating when it is necessary to operate, listen when you have to listen and operate with force and desire when the moment arrives.
It is to be expected that from this document each reader will have digested the information that be useful to be able to advance in this exciting world. A time has come in the that every trader tries to advance in whatever way and this document is a tool more to survive.
Markets change every day more quickly and adaptation is not always easy all if the necessary time is not available. It is everyone’s job to abandon that It does not work to open new avenues of attack and market interpretation.
You must avoid the complex what everyone uses to set a pattern differentiator as a way of entering the market. It has been proven as classic, what has always worked is being obsolete.
We must bear in mind that the retail or retail market is nourished by those Confident people with little knowledge and a lot of capital.
“To the market there is that with little money and a lot of knowledge and not vice versa”.
It’s pretty amazing that being leveraged 1: 500 (you only need the deposit of 1 part of 500) with 1,000 euros you can position one in the market for 500,000 euros.
If one is convinced to dedicate hours and effort to enter this business but if otherwise it is an opportunist looking for treasures it is better to abstain and dedicate the capital to another area.
We are witnessing a change of assets by traders and income investors variable that, by not obtaining stable yields in their field, they try others without knowing that the Forex in particular and the rest of derivatives involve more risks than benefits.
To know more about it read: Forex Tips 2