Planning Trades to Control Risk

Discussion in 'General Forex Discussion' started by ituglobal, Dec 10, 2015.

  1. ituglobal

    ituglobal Master Trader

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    The problem with many traders is that they have only half a plan, the easy half. They know how much profit they're willing to take, but they don't have the foggiest idea how much they're willing to lose. They're like a deer in the headlights, they just freeze and wait to get run over. Their plan for a position that goes south is, “Please God, let me out of this and I'll never do it again,” but that's wishful thinking, because if by chance the position turns around, they'll soon forget about their promises. They'll go back to thinking that they're geniuses, and they'll always do it again, which means that they're sure to get caught, and get caught bad.


    I have a true story I’d like to share: It’s about a broker I knew and a Coffee trade he made. It goes like this:


    I received a phone call from this guy moaning about a Coffee trade he was in. He was managing money and had all of his clients in this particular trade.


    Coffee, at least at that time, was, and still can be, an illiquid and extremely volatile market, and is often best traded by people who have a genuine need to trade there. But he was in and in up to his neck in trouble. He said, “Joe! I don’t know what to do! If the Coffee goes down any more, I’m going to wipe out all of those accounts.” He told me he had been so sure the market would move up that he never even planned the amount of risk he was willing to take, and by the time he had determined where to put a protective stop, Coffee had shot past that point.


    I told him I had no idea of how he could get out of his predicament, and that was an honest answer. I really did not know what he could do.


    Apparently, he decided to pray! He called me back that evening and told me he had gone into the restroom, closed the door on the booth, and knelt down and implored God to get him out of the mess he was in. He promised that he would never again trade Coffee if God would just save his skin from disaster.


    The following day, Coffee opened gap up, and moved to a point where he could get out at breakeven. He took the opportunity and got out. Later that day, Coffee moved even higher. Two weeks later, he was back trading it once again.


    The broker had no plan for what he would do if the market moved against him. Whatever planning he did was done after, not before, entry into the market. His irresponsibility took unlimited risk with client accounts, having no idea of his exit point.


    But perhaps worst of all, he was dishonest with both himself and his clients. He vowed to never trade that market again. Where were the discipline and self-control he needed to keep his promise?


    How many of us do the same thing when we trade. We make mistakes, vow to never make them again, and then do the same dumb things all over again. We take risk without planning, or realizing just how much risk we are truly taking. Then the market teaches us a painful lesson. I think you would agree, markets are very good at doing that.




    Author: Joe Ross


    This article was reproduced with kind permission of Trading Educators.


    In order to gain access to more helpful articles, trading products and resources, please visit:


    Tradingeducators.com/edition-600 OR Tradingeducators.com
     
  2. lexsmith

    lexsmith Newbie

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    Hello everyone
    I'm really glad to be with you to participate in this dan.Cung people build environment for each other can share more knowledge in the field of business. Let's talk about your wishes, we will work together to find solutions of their problems
    Thank mod,
     
  3. radex78

    radex78 Active Trader

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    Plannning trading is important for all trader before they making any decision in the market, with plan trading of course as trader they will can masure their maximum risk in single plan and also they can set target profit according their anaiysys, becaue forex trading is not only about profit but also about loss must as consideration for all trader to manage their capital in account.
     
  4. Lawrence

    Lawrence Active Trader

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    If we want to use a good plan in our trading then we will also come to know how it will work and what will be the best way to use that in our trading for getting the profits :)
     
  5. wisetrada

    wisetrada Trader

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    When real money is involved, a single trader does not make mistake over and over again. This is because he does not want to keep losing. however, mistakes can be repeated by each new trader that comes into the market.
     
  6. radex78

    radex78 Active Trader

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    Yes sometime as trader they making same mistake during trading, although they trying out to avoid same mistake, but if any trader always repeated same mistake, hence it's mean they still poor in psychology trading and should they improving psychology trading better to make strong mental and keep discipline trading so they can elliminate same mistake reppeated again
     
  7. Lawrence

    Lawrence Active Trader

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    Each type of trader is actually different so the trading he will do and his results will also not remain same. From my own trading experiences what i can say is that trading will become successful only when we will try to control our mistakes in this business :)
     
  8. radex78

    radex78 Active Trader

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    Yes indeed each trader has different system and methodology in their trading activity, and trade forex also required in calm minds to analyze the trend market and trade if likely on good timing which the market giving easiness to catch profit, I like trade on strong trending market.
     
  9. fxapex

    fxapex Active Trader

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    Yea you cannot have single strategy for all your trades you have to be innovative in formulating trades.
     
  10. radex78

    radex78 Active Trader

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    Forex market that aways changes , sometime kinds of market easy to analyze although only use trendline, but sometime news high impact can messed up technical analysis, some trader that trade based on tehnical anlaysis sometime they avoid trade on news high imapct because trend market being randomly and can't analyzed with technical analysis.
     
  11. Lawrence

    Lawrence Active Trader

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    Forex trading markets are never the same and if we are looking to get a good income in our trading then we must try to focus on the analysis because this alone can save our accounts :)
     
  12. Callagy20

    Callagy20 Trader

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    I feel that the simple mistake yet deadly that some traders do is think that the forex is one random thing of luck, so they jump in one trades opening and closing positions hoping to be lucky to make some pips. But this is wrong, making profit in the forex is not luck, it is planning and calculating.if it was all luck and no technical analysis, then why did most successful traders pass through a demo account first?
     
  13. radex78

    radex78 Active Trader

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    Although forex trading included in speculative investment, but as trader they will trade based on technical analysis and fundamental analysis approach, becaue every tick price movemnt already worth profit and loss possbility, and goal all trader open trades is making profit, so they should decided on good timing and best exit point also.
     
  14. Lawrence

    Lawrence Active Trader

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    We should try to keep our trading investments in such a manner that we are growing our income and also we will remain safe as a trader and know which are the good trades :)
     
  15. Callagy20

    Callagy20 Trader

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    This is what technical analysis is about. Knowing better the right place to use as entry and exit points. The idea of the trend is very useful in this. If a trader can accurately time when a major trend is forming and open a trade with the signal and it turns out to be correct, he can make a lot of pips from this. When it comes to trend trading, I think new traders can really find moving averages easy and very useful.
     
  16. radex78

    radex78 Active Trader

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    Yes , moving average is one simple indicator but useful for beginner to help them analyze the trend market, many beginner trader prefer trade with moving average because easy to understand, but don't trust with indicator one hundred percent, sometime the trend also in overbought and oversold area, might to identity this area, as trader can use stochastic or RSI.
     
  17. Callagy20

    Callagy20 Trader

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    Honestly I feel to make more money in the forex, you have to first protect your capital with adequate money management. Don't only look on what you can win, also have your eyes on what you stand to lose too. This is why it is very dangerous to trade without a stop loss.
     
  18. radex78

    radex78 Active Trader

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    Yes plan trading is one way to manage account to control the risk, if any trader only have small capital hence they need to adjusted risk management and money management to maintain their account, don't small capital using bigger lot size this is only will killing account shortly.
     
  19. Lawrence

    Lawrence Active Trader

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    If we will be able to learn how well we have to manage our trades then we will have some sort of control over our trading and that will allow us to do such types of trades that are profitable to us :)
     
  20. vicknic

    vicknic Confirmed ProfiForex Representative

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    You are correct. One big risk management I would advise traders to watch out for is moderates leverages. Leverages are really tempting as they help you open big trades with small capital but it is equally dangerous. I will simply advise a leverage ratio as moderate as 3:1. You may feel it is small, but most importantly it is safe to use!
     

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