HOW TO STOP YOUR TRADING LOSSES
This Book Includes:
STOP LOSSES
The art of stopping losses must be mastered
before profits can be taken.
An invaluable guide on HOW TO STOP YOUR TRADING LOSSES Whether you’re just starting out or you’re a seasoned trader, this set of concise rules, explanations, examples, and solutions will serve as both vital warnings and reminders to guard against the myriad pitfalls facing every trader.
Rule 1:
Your Stop Loss must be less than your Take Profit
Explanation: Never risk more than you could potentially gain in any single
trade.
Analysis: Amateur trading systems often incorporate Stop Losses that are
many times larger than their Take Profit target, based on the erroneous belief
that this will allow them to ride out price swings. While this may work in
some cases, it won’t every time, and ruinous losses will rapidly be accrued.
Example :
Jon uses a system with a 10-point Take Profit and a 20-point Stop Loss and makes ten trades over a couple of days. He enters trades carefully when he feels that there’s a higher probability of success and is pleased when 50% of them reach his Take Profit – allowing him to pocket 50 points (10 points x 5). The trouble is that he hits his Stop Loss five times too, losing 100 points (5 x 20 points). Despite his 50% success rate, the result of his ten trades is a loss of 50 points.
Precision Market The Trading Bible
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