In the previous lesson, we discussed how to scale OUT of a trade. Now, we show you how to scale IN a trade. The first scenario we’ll cover involves adding to your positions when your trade is going against you. Adding more units to a” losing” position is tricky business and in our view, it pretty…
As mentioned earlier, scaling out has the obvious benefit of reducing your risk as you are taking away exposure to the market…whether you are in a winning or losing position. When used with trailing stops, there is also the benefit of locking in profits and creating a “nearly” risk-free trade. We’ll go through a trade example to show…
Now that you know how to set proper stops and calculate the correct position size, here’s a lesson on how you can get a little creative in your trading. For those trading multiple position sizes, you can get really flexible and creative on how you manage your risk by “scaling” in and out of your positions….
Well, there you have it… our awesome primer to setting stop losses. Now let’s review the things you need to remember about stop losses. Find a broker that allows you to trade position sizes that suits the size of your capital and risk management rules. We use the word “predetermined” a lot in this lesson…
Once you’ve done your homework and created an awesome trade plan that includes a stop-out level, you now have to make sure that you execute those stops if the market goes against you. There are two ways to do that. One is by using an automatic stop and another through a mental stop. Which one is best…
Let’s talk about the four biggest mistakes traders make when using stop losses. We always stress using proper risk management but when used incorrectly, it could lead to more losses than wins. And you don’t want that, do ya? 1. Placing stops too dang tight. The first common mistake is placing stops tighter than those leather pants…
Time stops are stops you set based on a predetermined time in a trade. It could be a set time (open limit time of hours, days, weeks, etc.), only trade during specific trading sessions, the market’s open or active hours, etc. For instance, let’s say you are an intraday trader and you’ve just put on a long trade…
To put it in simple terms, volatility is the amount a market can potentially move over a given time. Knowing how much a currency pair tends to move can help you set the correct stop loss levels and avoid being prematurely taken out of a trade on random fluctuations of price. For instance, if you are…
The previous lesson discussed how to set stop loss using a percentage-based amount of your account. A more sensible way to determine stops would be to base it on what the charts are saying. Since we’re trading the markets, we might as well base our stops on what the markets are showing us… Makes sense, right?…
Let’s start off with the most basic type of stop: the percentage-based stop loss. The percentage-based stop uses a predetermined portion of the trader’s account. For example, “2% of the account” is what a trader is willing to risk on a trade. The percentage risk can vary from trader to trader. More aggressive ones risk up…