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Important Aspects in Forex Trade Management Trade management is all about how a trader manages his trading activity to maximize his potential profit and minimize the risk of losing profit. Here are valuable suggestions that can help in applying trade management principles in a trading activity situation. In trading, when you’re experiencing losses, part of implementing trade management is to manage your losses, and one way of managing it is to place a stop-loss order to prevent your account to be wiped out from the series of losses on that particular trading day. A stop-loss order is an order that closes your trading position when your losses on that trade have reached a low, loss amount at that period when you initiated the stop-loss order. It is important to put at 2-6 pips when you place a top-loss order, if you’re doing a long position, and a 2-6 pips with the addition of spread above the most recent high, if you’re doing a short position. The smallest amount by which a currency quote can change that is $0.0001 for US dollar related currency pairs is called a pip. Without the stop-loss order, a trader can face a big risk of profit losses, since this stop-loss mechanism was purposely designed to protect traders from losses due to the inherent volatility of Forex trade. When you do not make an immediate action when trading goes into your favor, chances are instead of winning you might end up losing; for instance, situations during trading that after a series of small variations in prices, the trade begins to move in your favor, which is giving you the winning position, when suddenly the price reverted back to its old price before you can react to secure your profits, in which case, this is a classic example of a winning position that resulted into a loss. Before the price can revert back and result to a loss for you, place immediately your stop-loss order, so that the price, which you won in your favor, will be intact as your profit for that particular trading time.
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Kinds of price movements vary in a Forex trade, these are: the up movement or uptrend, the down movement or downtrend, and the range movement, where the price moves up or down within a specific range. The importance of learning the signs of these movements is to allow you to decide as to when to place a top-loss order when prices are going up in your favor. When in a downtrend and the price continues to drop, wait for the price to revert back or retrace itself, but if it continues to go down, adjust by putting a stop-loss order; in this way, the stop-loss mechanism enables you to accumulate profit while preventing loss.5 Uses For Markets