Let us get acquainted with some useful trading tools allowing us to protect ourselves from unforeseen losses to certain degree and take the expected profits.
These are STOP and LIMIT. For a previously opened position an instruction may be entered at any moment (during the working days) to close it, if the rate reaches a preset level. For example, you have opened a position expecting the rate to go up (on the chart). To protect yourself from significant losses if the rate moves down, especially in such a situation when you don't have or are about to lose control of the market, you should enter a STOP, that is set a price at below its current value at which your position should be closed with no further instructions. Similarly, if you have opened a down position, then you should specify a price above its current value. In this case you should bear in mind that if the STOP is set too closely to the current rate value, then a random rate fluctuation may close a correctly open position at a loss, but if it is set too far, then the losses could become unreasonably high. LIMIT is a rate value that you set at which the position should be closed with a profit, that is the value of the LIMIT should always be above the current level, if you play long, and below it, if you play short. It should be noted that STOP and LIMIT should differ by more than 20 points from the current values of BID or ASK (in accordance with what side of the market you play and which of these tools you use).
A few more words about the differences between operations and service in training and real trading accounts.
In the quoting mode of a training account real quoting does not occur, and the offered price corresponds to slightly modified BID/ASK ratio (depending on whether you play long or short). Naturally, with a real account the offered price does not usually coincide with the value of BID/ASK (the difference is 1-2-3 points in a calm market, more often than not it's not in your favor).
The time lag between a rate inquiry and the receipt of a quotation (about 10 s) in a training account simulates the real-life lag rather well (usually 40-50 s, sometimes longer). It should be kept in mind, though, that the quoted rate is equal to the rate at the moment of quoting, rather than the moment of inquiry.
The rest of dealing with real and training accounts is essentially the same (disregarding the financial side).
THE MAIN TRADING REGULATIONS
Do not trade against the trend. Many new traders try to catch the sudden change of the tendency, then buy at the bottom of the market and sell at the very top of it. This is a faulty practice. In reality it's practically impossible to determine the moment when the market changes its direction. The price aim, which seems unattainable today, may turn into an easy passable border tomorrow. It's not sensible to open big positions using all the deposit. Any trader, whose deposit is bigger than a certain sum that seems big enough to him, starts feeling himself comfortable and free in the market. But even such a speculator has to insure him from unjustified risks. You should not invest all your capital into trading. Differentiate your risks. Try to open positions on several financial instruments. Then the risks will be dispersed, and one incorrectly opened position will not influence the state of your financial portfolio. Limit your losses, using stop loss orders! Never cancel a stop loss order. Stop loss orders are your insurance from big losses, and most of successful traders always use them in their trading strategies.
PLAYING WITH RISING AND FALLING
The rule "buy cheap, sell expensive" is well known to everybody. This approach describes the point of the play with rising, when your income is derived from the market growth. But one of the advantages of the modern financial market is the fact that you can derive your income not only from the growing market, but also from the falling one. Seeing that some currency is getting cheaper, you don't have to wait for the trend turning around to the direction of growing, but you can sell this currency and earn money on its falling. Such an opportunity allows visiting the market more often, earning money.
ADVANTAGES OF MARGIN TRADING
Transactions in the FOREX market are carried out on the principle of margin trading. Margin trading is a comfortable and most popular way for small investors to conduct transactions in exchange markets. A small starting capital allows conducting transactions for the sums that are many times bigger than the capital itself. Trading in the exchange market, a trader for each invested dollar gets a credit from his broker for 100 dollars more. That is, having 2,000 dollars on your trading account, in the real market you can operate with the sum of 200,000 dollars. Thus, having even a small sum of money, you can open contracts for many millions, risking only by your small deposit.
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