Forex trading course points
In my Forex trading course I talk about the use of stops. Stops are very important as a means of limiting losses, however, stops also create losses. How often have you been stopped out only to see the market move right back in the direction that you thought it would go. In fact, many times it almost seems like the market "gunned" for your stop and your stop became the turning point.
Mechanical stops not always ideal
Rather than place mechanical stops I prefer to use market composition to help with risk management. Market composition describes the current position of market participants as well as their intended positions (otherwise called resting orders).
Most trading platforms give you information on current potions of market holders and resting buy orders (below the market) and sell orders (above the market) and the quantity (depth) of those orders.
Market is like a river
When thinking of the market and the way it moves a good analogy is a river. All rivers flow to the sea, however, rarely do rivers flow in a straight line from their source right to the sea. The twist and wind and sometimes even turn back on themselves at certain points. That's because there are natural points of resistance to that flow: outcroppings of land, the riverbank itself, other obstructions. The river flows constantly and it gets to the sea, however, it winds and turns in the process.
Natural resistance
Same with the markets. there are normal points of resistance because of positions that are held in the marketplace by current position holders and there are those who want to enter and their orders (their capital) present resistance or thrust to the markets.
Being aware of the market composition is vital to successful trading and it is a way that you can incorporate money management without using arbitrary stop losses.
Forex trading course videos
For more information and to learn the professional way to trade, please consider purchasing my 30-hours of Forex trading course video instruction. Click on the button below.
