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Trade
Position to breakeven
Often there is a belief among traders that first of all it is important to save capital on your trading account, and only then seek him more and multiply. A tactic in this case is moving the Stop Loss order to the level of open trade once the market price moves in a profitable area. Let us consider that, in fact, is the transfer of positions to breakeven.
What is remarkable about this operation? First and foremost is, of course, a certain psychological influence on the speculator. The fact is that if a person is aware that as a result of the transaction, it can now only earn, but certainly nothing to lose, it positively affects her psychological state, and therefore to be objective when making trading decisions.
Also, the transfer stop on the opening price of the transaction significantly reduces the number of losing trades in the trade, as, indeed, profitable. Among the shortcomings, the most significant are: the reduction of profitable trades and understanding of most traders, what is actually happening when they transferred a Stop Loss order on the position opening level.
An example of the transfer of positions to breakeven
, Consider an example where in trading is the transfer of positions to breakeven. In Fig. No. 1, we see level 1. Occurs the breakout level to the upside the currency pair. Suppose we are at level 1 opened a buy deal. We put the Stop Loss = 100 pips, Take Profit as 100 points. Further, when the price reached the level 2, we make the decision to move the Stop Loss to the opening price of the transaction. Thus, as can be seen in the figure, the next day, the price returns to the point of opening the position.
It turns out that the deal was closed with zero result. What is a null result in this case. This does not mean that the transaction price was for us in the profitable area and then back the same distance, because we are in this deal spent spread is earned by the broker. Thus, while passage rates in the direction of profit, for example, 40 points and at its further turn back to close the deal in zero will have a price to go 40 pips + spread.
Consider the case, but this time it won't move the Stop Loss to the opening level of the transaction, and just fix profit at the level 2 and re-buy the currency pair. For this we need figure 2. The same situation with the opening position at 1. Once the market price reaches 2, we close the trade and immediately open a new purchase. Thus, in the new position we put Stop Loss at level 1.
The next day the deal closes when working out the Stop Loss. As a result, we see the same with the first case of a painting, only in this case we spent two spreads. If you neglect the spread value, we can say that both options are similar, but they help to understand something useful, as will be discussed further.
Another meaning of breakeven
It turns out that the transfer Stop Loss to the opening level of the transaction is the same as if we closed the position at the time of the transfer stop, and opened it again. This situation helps to take a new look at the need for this action, namely, the transfer of the Stop Loss.
The first trade is already in profit zone, and at this point we decide to translate it to breakeven. In fact, as can be seen from the second example, close the profit and decide to reopen the deal. That is, the trader should realize that he needs a new signal system, but, as a rule, no one is looking.
Break-even is perceived simply as a natural way to protect capital from loss, but actually more difficult. What you need to understand the transfer Stop Loss to the opening level of the transaction? The answer is simple and complex at the same time.
If there is no desire to understand the whole principle of this action, which is very important for those traders who trade on trading systems, then there was no need. But if You open trades only on the signals of your system, you may think that translating the position to break even, You open a second trade in its sole discretion, at the risk of losing the profits derived as a result of closing the first deal.
If there is no signal, to reasonably access a second operation (see the second example), then maybe just close the first trade with profit and then wait for a new signal?
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| Category: Forex | Added by: (30.10.2017)
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| Views: 313
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