Investing Blunders made in Forex
Whenever you decide to step into the Forex market by investing
into this trading business, you should prepare yourself for
entering into the market, somewhat blind.
This because you or anyone else, who is just stepping in, can not
entirely know what position of the investing trend is currently
going on, in which you are entering at.
Or, you might invest in the Forex market just before the market
Smart and planned investments are the ones which protect your
trading flow and help you put up a stop loss order on all your
trades. And yes, this exit point of your trade has to be decided
beforehand, that is before you enter the trade.
Once in the market or trade, you won’t have much time to think and
last minute uncertainty can give room to blunders.
A stop loss order can plainly be defined as a trade exit point
decided beforehand, which helps a trader in keeping a track of the
right point at which to exit the position he is trading at.
A predefined exit point shields your investing plan for trading
purposes by cutting your losses, and also guards against all your
emotional or gut feelings which might tell you that you may get
lucky with this deal or that.
Hence making you go ahead and bet in a deal without thinking much
about your position and whether you will be able to bear its
results if the market moves against you.
Another important fact about the history of investment blunders is
that all the giant investing losses had once begun as a series of
small losses. And this is exactly the reason why predefining a
stop-loss order is so vital before you begin with a trade.
There is however a very common doubt which seems to be appearing
in every trader’s mind while deciding the stop-loss order, “How
wide should I set my stop?”
And although there are no standard answers to this doubt, it can
still be cleared with some help.
Firstly, the width of your stop-loss order totally depends on the
time frame for which you are planning to invest.
If investing short-term, you will have to set a stop loss order
which is closely set to the currency price. But if you are
investing long-term, you will have to give your currency price
some more room to shift or move about and therefore, set your
stop-loss order a little lesser.
Secondly, once it is clear to you what time structure you will be
trading for, you are now required to eradicate the typical market
disturbance in terms of instability, in that specific time
Setting very tight or limited stop-loss orders can have some
serious drawbacks to it, some of which are as follows:
• Firstly, setting tight stop-loss orders will actually minimize
the consistency of your trading system because due to a tight
order, you will get stopped out of the trade a little too often.
• Secondly, since your trading transaction costs add up for a key
share of your company expenses, you considerably amplify your
Therefore, it is always advisable for the Forex traders to develop
a trading system that is operational for a somewhat extended time
With a smart and planned trading system employed, stop-loss limit
set to minimize investing risk, and a well structured money
management strategy in place, any trader can be well positioned to
get the most out of their market trading and profits.