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Food For Thought
By Laetitia Vaval | September 21, 2007
I found an article by Tom Long on www.forextradingblog.com. He talks about using protective stops and his article identifies one of the major DON’Ts that I’ve been doing on the demo account and that I briefly touched upon in some of my previous posts. I copy-pasted what I believe to be the essence of the problem: “Too many new traders use what they call a “mental stop”. They have a price level in mind where they would consider getting out if the market moves against them, but do not enter it into the trading platform. Typically, when the market does move down to that price, instead of exiting, they “wait and see how the market will react”. If the loss becomes larger, they then decide that they will exit when the market moves back to their original mental stop level. As the market continues to move against them, intentions about getting out turn to hope about the market coming back before they get a margin call. Many times, it is that margin call that determines their exit, not their own analysis”.
As I will be trading live very soon, I can not make that mistake again. I have to 1) use protective stops and 2) respect them. Hopefully, the fact that I’ll be trading with “real money” will be a good enough reason to not take such a useless risk !
Tags: currency trading, dow, forex, forextrading, trading strategies, wall street warrior
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