165
THE CANDLESTICK TRADING BIBLE
The importance of a Stop loss
All good methodologies use stops. A protective stop loss is an order to
exit a long or short position when prices move against you to specified
price.
The stop loss insures against a usually large loss and has to be used in
one way or another.
An initial stop loss can be placed with
your order on the trading
platform; the trade will be closed, automatically when if the stop loss
is hit.
This type of stop loss will allow you to execute your trade and go spend
time with your family or friends, this will help you to trade out of your
emotion, because you know how much
money you will lose if the
market didn’t go in your direction.
Lot of traders use mental stops, when they enter a trade, they don’t
place
a stop loss, because they think that the broker
will hit their stop
loss which is not true.
The reason behind using mental
stop is the human psychology,
humans hate to lose money. And if you don’t accept losing money as
a
part of the game, you will never make money in the market.
Don’t never think of using mental stops, because you can’t control the
market, you can’t be sure that the market will do this or that.
Before you enter a trade, calculate how much you may win, and how
much you may lose. Place your stop loss order. And your profit target.
And forget about your trade.
Don’t ever risk money that you can’t afford to lose
I got lot of questions from traders asking me about how much money
they need to start trading. First of all, you have to take trading as a
business. You can make money in this business and you can lose it as
well.
