The rule is, when you place a buy order above the current market price it is called a stop order, and when you place a sell order below where the current price is it is also called a stop order. Most stop orders are known as "the order placed to exit the market at a loss after you enter"-the order used to protect your principal equity. Every trade should have an entry point, a predetermined exit point for profit, and a well-thought-out exit point for minimal loss should the market not go your way.
The rule is, every buy order should have two sells: a sell limit order for profit and a sell stop order for loss protection.
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Conversely, every sell order should have two buy orders: a buy limit order for profit and a buy stop order for loss protection. Some trading software programs allow the trader the ability to place an OCO one cancels the other order. This means the moment the market hits either the stop order or the sell order, it cancels the opposite order. By trading with an OCO order, you are not left exposed with a working order after either your stop or limit has been filled and you have been taken out of the market.
An OCO order offers you the opportunity to set a trade and forget about it. You can literally walk away from your computer and not be concerned with catastrophic results if you have properly quantified your potential losses before you placed the trade. No one knows where the next pip will go, so the best you can do is plan your trade and trade your plan. One of the most important and productive habits you can adopt is properly educating yourself about the Forex before you begin trading. If you move forward without the proper education, be prepared to lose your money, much like in a casino.
You will be trading off your "gut feel" and emotion and placing yourself in the same position as that of a reckless gambler. Just like the casino, the market will be there to take all your money. I have learned that to achieve success in trading requires learning to understand the three critical facets of trading: 1.
The technical education and trading knowledge 2. The fundamental understanding of what determines market movement 3. All successful traders learn that working through frustration is the path to success. Knowing what to do when you get frustrated is critical.
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Learning to overcome and master your frustrations in life, as well as in trading, is an important part of a trader's armor. Strong people make as many mistakes as weak people. The difference is that strong people admit their mistakes, laugh at them, and learn from them, and that is how they become strong. Mistakes are part of being human. We need to appreciate our mistakes for what they are. Just about all of life's important lessons can only be learned the hard way, by making mistakes.
Before you begin trading, you need to create your own mission statement to help you focus on becoming an educated, financially successful, long-term Forex trader.
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I want you to think of your journey toward becoming a successful trader as a transformation of thought, a new process of knowledge build-up, followed by: 1. Disciplined thought 2. Disciplined rules 3. Practice first on a demo account to become comfortable with the trading platform before trading with real money. You begin to trade with real money, work through your emotions, and learn to trade within the equity management rules to achieve a consistent financial return. You mechanically execute profitable trades with no emotion.
Your decisions are based on your belief, education, established rules, and experiences to achieve a consistent financial return.
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More than 90 percent of all traders who attempt to become successful on the Forex fail. Our professional international team at Market Traders Institute adamantly believes in proper education first. Knowledge is the key that can make a big difference in the success of a trader, providing a necessary edge.
I cannot stress this enough: the majority of the world is locked into managing its poverty or mediocrity. Very few people learn how to manage any kind of success because they are not given any sort of manual or instruction guide to success.
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Growing up, we learn how to survive financially from our caregivers and circles of influence. But not all mentors are successful, leaving many to learn through trial and error. Thousands of books have been written on how to achieve some sort of success. I believe that success comes from acquiring the right education about the opportunity; possessing the right work ethic; implementing the right productive daily habits; and believing with focus, concentration, action, and a positive attitude that your dream will come true.
Successful people keep things simple.
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They find beauty in simplicity. The average person, for some reason, tries very hard to complicate things, even the simplest processes or procedures. I, on the other hand, have worked hard to take a very complicated issue, Forex, and simplify it, enabling just about anyone to understand how the markets work and how to trade them. During the next 18 days, it continues the loss of information until it settles at 3 percent retention of the new information.
In other words, "if you don't use it, you will lose it. Our focus at MTI is to provide you with productive practical, continued education, enabling you to be trading with percent-plus recall. We provide our clients with the MTI trader's checklist, enabling them to cover percent of all the trading issues before they trade, just as a pilot covers his flight checklist before he takes off.
You must practice them over and over again until they become an unconscious habit. Doctors do not start operating on their patients after a semester in school, and pilots don't fly passengers around the world after a weekend class of learning how to fly.
Doctors practice on cadavers first. They practice a long time before they are allowed to perform any operations-for the simple reason that other people's lives depend on their actions. Pilots fly with instructors long before they go solo. The same reasoning and rules apply to trading: although you might not lose your life if you don't know what you are doing when you trade, you most certainly can lose your financial stability. I personally believe that self-empowerment is learning how to fish and that dependency is all about being handed a fish to stay alive. I know there are many companies out there offering education, trading strategies, and even trading systems that claim to take you from "rags to riches" in a short period of time.
Make no mistake, there is no holy grail! You cannot buy any indicator or trading system that works percent of the time any more than the airlines can buy an autopilot system that eliminates the need for pilots. If you are being courted by any company that is leading you to believe you can buy a trading system with buy and sell signals that will take you from "rags to riches," you will be greatly disappointed.
I would think not, because if you could create such a trading system, all you would need to do is walk into any major financial institution like the Bank of America or the Royal Bank of Scotland and show proof that your automated system works. Just as there is no perfect trading system, there is no autopilot system that works without a pilot. I very much doubt that human beings will ever put their lives on the line with a computer or autopilot system in an airplane without a pilot. We all have bought enough electronic equipment in our lives-TVs, VCRs, cameras, and so forth-to know they all fail eventually.
Don't put your hard-earned money in a get-rich-quick scheme. Pilots are educated and trained to fly proficiently before they are even shown where the autopilot system button is. I will never forget back in when I got my private pilot's license.
The first time I got into the cockpit with my instructor I asked him where the autopilot button was. He looked at me and said, "If you ever ask me that question again before you get your private pilot's license, I will throw you out of my class. I did eventually learn how to engage the autopilot function and will have to say, the autopilot system is not a fail-safe function without the close monitoring of a pilot. As powerful as such systems are, when things start to go wrong, they cannot make spilt-second decisions in the best interest of the passengers. They can only do what they are programmed to do, and there are too many variables in flying to program absolutely everything.