Stop Loss, Hedging, And Cut Loss
Stop Loss, Hedging and Cut Loss are ways to limit losses in forex trading. Stop Loss means we install an automatic order to close a position when the price touches a certain price level where the price becomes the limit where we are able to withstand a maximum loss.
Stop Loss, Hedging and Cut Loss are ways to limit losses in forex trading.
Stop Loss means that we install an automatic order to close a position when the price touches a certain price level which is the limit where we are “able to hold the maximum loss”. We can determine for ourselves how many losses we are able to bear when we install this Stop Loss. Regarding the technique of determining this SL, I’ve discussed in the previous article.
Hedging or Locking means we open buy and sell positions simultaneously or without closing one position. In practice, we can use pending orders or instant execution to hedge to protect one position. I also discussed the hedging problem as a substitute for SL in the previous article.
While Cut Loss is to closed a position manually. These three ways we can do to limit losses, of course unless we will indeed let the capital eroded alias MC.So, which of these three ways is most effective? Well, actually it depends on the “tastes” of each trader. Stop Loss is more certain , because a position will be automatically closed when we consider the loss to be too large. Of course we have calculated the size of the losses for each of these positions in our trading plan. So, psychologically, SL does not create doubts.
Hedging or Locking is mostly chosen by traders who want a more flexible limit of losses, that is, losses remain limited, but still hold the hope that negative floating positions will be covered with profit. Hedging, if managed properly, will indeed allow us to close one position with profit. However, it requires patience, thoroughness, and also discipline in margin management in hedging. Many hedging that actually resulted in additional floating negative collection that eventually culminate in the MC. The main difficulty in hedging is in margin management and in opening the locking.
Opening locking for inexperienced traders often leads to doubts. We often doubt, when is the right time to open locking or close this hedge position by closing one position. The usual question is: “Close now or not? Close now, maybe the trend continues … the minus becomes worse, while the plus is already closed. If it doesn’t close now … maybe the trend is backwards direction, so do not even get dapet deh. “ It takes patience plus high confidence when opening this locking.Traders who use hedging are advised to open locking and keep maintaining positions and scalping to cover losses if the trend continues. This method certainly needs to be calm and psychologically mature so that it isn’t easily provoked by chart movements that sometimes “cheat”.
Other suggestions for those of you who want to use this hedging method, use hedging only if the available margin is greater than the used margin. If the margin is thin, just use the use of SL or all Cut Loss ajah. Well, Cut Loss is usually the last resort to limit losses. I personally use Cut Loss usually if already bored liat floating over time. Surely this is not an example worthy of imitation! A lot of them too .. temen-temen pure trader scalper, and just doing all the actions manually, including close the transaction, both in a state of profit and in a state of loss, which means doing Cut Loss, in floating conditions that are not too much like which I used to do … hehehe!
Okay, any alternatives you will choose to limit losses, all depends on you. Everything needs “courage” alone. Well, my trader friend said that the trader profession needs courage and a strong mentality. Especially, of course, when you have to bear the risk of loss and take action to prevent greater losses. Do not let because we hesitate in limiting losses, eventually had to be forced by the broker to close all positions, aka Margin Call.