The Internet now enables people to make money from home trading forex online. The thought of doing this was no more than a dream up until a few years ago. Now it is an exciting reality.
Not only is it possible to make a living this way, but one may actually make a fortune. It has been done by others, and their achievements can certainly be repeated. Those are encouraging facts.
Less encouraging are the examples of those who have not made it. Some have lost a portion of what they had, others may have lost everything. Many are still in the balance between success and failure. All must accept that some losses are inevitable. However, the challenge is to make profits exceed losses.
It is essential to have a strategy that suits the temperament of the individual trader. Once that strategy has been worked out it must be adhered to in a disciplined way. Some losses will be endured but if the profits exceed losses the strategy may be termed a success.
Every trader must develop a strategy to suit his own temperament. If he is impulsive his strategy must take that into account, and if he is instinctively a gambler, that too will have a bearing. The personality determines the strategy. The most essential thing remains the discipline to apply it. .
Having born the initial loss the individual may set a stop loss order that will protect him from losing too much more, or in some cases his entire capital. The broker will close the position as instructed by buying or selling in order to close the position. After the position is closed no further loss can be incurred.
Trading capital can be protected by the stop loss tool. However, the tool itself is no guarantee of success. In fact it can be quite damaging in some circumstances and some traders refuse to use it.
A string of small losses can be very debilitating. It can erode a capital base and destroy confidence. A further problem occurs when a position is closed at a certain point, and the price quickly reverses after the stop loss has been executed. The trader must then watch with clenched teeth as the reversal carries the price to what would have been a healthy profit had the stop loss not been exercised.
Because of the pitfalls some traders eliminate the stop loss facility from their repertoire of skills. Instead they will watch a screen continuously and execute a sale manually at a loss when they can no longer tolerate it. This method can of course be an element in a successful tactic, but when an unexpected power outage occurs one can be lift dismayed by losses of an unknown extent.
Once a deal is ‘in the money’ a trailing stop loss may be placed. This will follow a rising trend and only operates when a reversal occurs taking the price down to a determined price or a number of percentage points below the high. This tool can lock in a rising profit as a price moves up but may still trigger when not really wished for. In the final analysis the trick is set stop losses at the right points.
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