Using Protective Stop Losses
One of the key characteristics that separate expert spread betters from those newer to the market can be seen in the way each side approaches risk and reward. New traders tend to get caught up in the prospects of quick riches, and this is easy to do because there are many advertisements for trading systems that promise excessive gains for traders with little or no real world experience. Expert traders, however, tend to approach these markets from the other direction and focus on the amount of risk exposure that is undertaken at any given time.
Setting Trade Parameters
Stop Loss Management
“One thing that must be understood,” said Haris Constantinou, currency analyst at TeleTrade, “is that you must determine the exact price level where these stop losses will be placed before any trades are made.” To determine this price level, traders will use one of a few different methods. One option is to use a set a value in terms of price movement, for example $5 in a stock trade or 100 pips in a currency trade. This is perhaps the easiest method, as it allows for a consistent approach that can clearly defined and can be used regularly.
Stop Losses as a Percentage of Account Size
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.