February 19, 2008

Why Stop Losses And Limit Orders Are So Important

If you're serious about becoming a full-time profitable forex trader, then you really should have a firm grasp of how to successfully place stop losses and limit orders.

When I first started trading several years ago, I was using a trading platform that was very easy to use on the whole, but the one thing that I was struggling with was trying to work out how you could place stop loss and limit orders into the system which would give me peace of mind when I was away from the computer.

You'll be amazed at how often your profit targets are reached (ie limit orders triggered) and stop loss are triggered when you're away from the computer, particularly during overnight sessions when you're tucked up in bed.

I used to settle for closing all my trades manually and set mental stop losses and profit targets. However this meant that when I held overnight targets I would often wake up to see that my theoretical profit target was reached overnight, but because I wasn't at my computer I missed the opportunity to close the position and subsequently the price retraced back towards my initial entry point.

This was incredibly frustrating and it was only after about two months that I decided enough was enough and I finally forced myself to fully understand how to set stop losses and limit orders using my preferred trading platform.

As a result my profits dramatically increased and I've been using them extensively ever since, so no matter what broker or trading platform you are using, learning how to place stop loss and limit orders should be one of the first things you do.

Trust me there's no better feeling than getting up in the morning and seeing that your limit order was triggered overnight and your profit target of 100 or 150 points was achieved whilst you were sleeping.

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