stop-loss-70-trades-reviews

Stop loss: what is it and how to use it

Stop loss are a tool to control trading losses. You can lose with online trading, you have to remember it always. Even the best traders, those who can make millions, are not immune to losses because no one can control what the market does. Good trades are not afraid of losing money, simply using the best tools to control the risk. The best tool to control the risk of loss is called stop loss.

Using stop loss is absolutely necessary if you want to keep track of your losses. It is a simple tool but must be thoroughly understood.

A stop loss is the maximum level of loss that a trader is willing to accept. As you open a position on a trading platform, it is always advisable to fix the price level at which the platform automatically closes the position. It’s a really simple procedure, even for those who do not have much experience and so always recommend doing it.

stop-loss-chart-explainHow to set stop loss

The novice trader who has come to this point of the article is surely thinking that stop loss is a great idea (he is right) and has already figured out what the right loss threshold is willing to accept: 0. And here you are wrong.

The problem is that the price of an asset on the market varies continuously and so if you stop the loss to zero you seriously risk that your position is closed immediately because there is a small loss. In practice, if you set the stop loss at zero, many operations would be closed immediately. Online trading would be a waste of time. Most of the operations would be closed before they could generate profits.

It’s obvious that fixing an excessively large stop loss also has negative effects because the expected losses could be excessive. Fixing stop loss is an art that you learn with practice.

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Forex and global markets. Focus: Japan

trading-markets-70-trades-reviewsThe japanese index Nikkei 225 continues to grind records with the sixth consecutive rise, most probably beacuse of the Prime Minister Shinzo Abe’s election affirmation. A victory that encourages investors to continue the ultra-expansive policies of the Japanese central bank. The japanese index updated this historic record since its inception in 1950.

Europe moves more cautiously awaiting the Federal Reserve decisions (considering the Janet Yellen’s succession and Donald Trump decisions) and the European Central Bank.

In this context, the euro is slightly upward and in the US there is optimism around the quarterly season, which according to Goldman Sachs will be better than expectations.

From the macroeconomic point of view, in Japan, the SME index slowed down in September, but as seen it did not affect the markets.

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Do You Want To Start Trading? Read The Instructions

Many people are attracted to trading. After all, it’s one of the few ways that you have to belong or to be a part of a huge company. Even if you only have money to buy 1 Apple share, you’re still considered a shareholder. And this is something that not everyone can say. However, trading, either stocks, futures, Forex, or any other financial instrument, is not as easy as you may think and each one of these particular markets has their own specifications and terminologies. When you’re a good stock trader it doesn’t automatically mean that you’ll be an awesome Forex trader or a great commodities trader.

Are You Considering Trading Online?

When you’re serious about trading online, the first thing you need to decide is about what you’re going to trade. You can choose between stocks, futures, Forex, CFDs, options, and so many other financial instruments.

Usually, when people refer to trading they are usually referring to stocks. If this is your case, you should go for it. You need to make sure that you read and understand all the terminology behind this specific financial market and then decide the strategy you’re going to use to trade. You can either choose between fundamental analysis or technical analysis or use both. You can prefer the quick trades that are usually riskier but tend to offer higher returns like day trading, or you may simply want to give your savings a chance to make money on their own. In this case, you’re going to opt for a longer-term strategy, more specifically, based on stocks that pay high and consistent dividends.

As you can see, it’s not only about making the decision about the market that you’re going to trade on. It’s a mix of decisions that should be based on your personal preferences and on your own personality as well. If you like to risk, go ahead for day trading. But if you’re a more conservative person, then you should rather choose swing trading or an investment (long-term) strategy.

What About Forex?

The Forex market is not new anymore. However, due to the low amount that you’re required to open an account with a broker, it’s usually one of the preferred choices among new traders. This combined with the fact that it is open 24 hours a day, gives you a lot of flexibility to trade, even if you have a full-time job.

There’s no question that the Forex market is attractive. The leverage (although it was better a few years ago it’s still better than the stock market, for example), the margin, there are countless benefits of trading this market.

However, you need to be careful with one thing. What may seem an advantage in the first place, may not work as well when you’re trading by yourself. Let’s take the fact that the market is open 24 hours a day. If you already got the chance to open a chart for any specific pair, you’ll notice that despite there are times within the day that the currency pair has a huge transactions volume, on other occasions it just remains almost flat. The fact is that when you’re trading the Forex market, you’ll need to look for the time where the currency pairs you want to trade have more volatility. This is how you’re going to win money trading the Forex market. And this schedule may not be compatible if you work and can’t access your broker platform during the day.

So, What’s My Final Advice?

My advice is that you need to choose a financial instrument that you feel comfortable with. Despite the disadvantages that I focused above about Forex, you can place automatic orders that will be filled if the price of the currency pair you are trading reach a determined price. So, you’ll still be in control, at least, in some part.

In what concerns stocks, there’s a lot to say about them. You need to think about using or not using indicators, which ones, the kind of orders you’re going to place, among so many other things.

The thing is that there’s not a perfect market. The best market is the one that you feel most comfortable trading on.

Scams: It Pays Off To Be Alert

Unfortunately, there are many scams out there. Both on the broker’s side as well as on the strategies people try to sell you as amazing and that will only make you lose money.

Make sure that you do a good due diligence before you open an account with a broker. And in what relates to any possible service that can provide you with signals for the best stocks, commodities, or currency pairs, make sure to test them on paper first. Don’t commit your hard-earned money without even knowing how good this company is.


Author: Editorial staff of 70 trades reviews blog