Forex Trading Tips | Stop Losses!

Forex Trading Tips | Stop Losses!

Let’s be honest, no one wants to flush money down the drain. Unfortunately that is a very common reality for new investors. In one of this weeks forex trading tips, I’m going to talk a little bit about stop losses and what this nifty little buzzword means. According to this forex trader tips writer, I believe that stop losses are the most important tool to learn in the forex market.

So, let’s start with a definition. A stop loss is just another way to protect yourself and your investment. Stop losses can be used in a variety of different investing vehicles, including Forex. Which is why this is one of our forex trading tips. Stop losses are commonly used, so you have probably seen this term on other sites. A stop loss is an order placed with your broker that automatically sells your holding(s) after a certain price is hit. That is it! Think of it as a floor. The pricing cannot go past this certain price(the floor) and because of this, it greatly eliminates your chances of losing money. This is also extremely valuable in Forex trading since the hours of trading are not the same as the stock market.

One example of when this is needed:
Let’s say you and Norman, your trusty dog are on a vigorous walk. After that heavy night of drinking it is time to work those beer calories off. Norman starts to get tired so you figure you call it a day. You started at 10:00AM and you look at your watch. “OH MAN, it’s 3:00PM!”. Yes, yes you did just walk 5 hours. Pat yourself on the back. HOWEVER, your walk happened to also land on a day that the market is open. You then get an email on your phone that says the following. “The Euro has totally lost it’s value. Sucks for all you Forex traders!”.

“Oh No!” you scream. It turns out that the Euro was your favorite form of currency and you have a position that is going to be affected!!!! Suddenly bad things come to mind. You’re thinking of you and Norman being on the sidewalk asking for quarters. You will probably have to find a guitar and figure out how to play it. Most homeless people have those so you need to follow suit.

But then it hits you. You are one smart cookie and you put a stop loss on your position. At 5% below bid. Becuase of this you read one our forex trading tips, your nestegg is saved and you and Norman don’t have to take to the streets.

Do us all a favor(especially Norman), and get to know the ins and outs of stop losses. Visit for a more detailed look at stop losses. Our Forex trading blog only scratches the surface of these nifty little tools. However it could be one of the most important tools in your investing toolbelt.

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