Introduction Of Trading Day
A trader does not only focus on one currency pair but also others as well. As such, in a single day, such an individual may make 100 trades, some of which will result in wins while others will result in losses. In this case, profitability depends on whether the pips earned in the winning trades are more than those lost in the losing trades.
Nonetheless, an investor should focus on making more winning trades. Notably, if about 60 out of 100 trades are profitable, such a trader has a win rate of 60%. Investing in a high-risk trade reduces the win rate, but the possibility for a high reward following trading day implies that such a trader is also likely to make profits.
However, traders should keep their risk on each of their investments at 1% of the making money they have used or less.
Insulating oneself against making a loss that is greater than the stipulated 1% entails using the stop-loss order. In this order, the broker automatically sells the currency when it reaches a particular price. It is particularly important because of the unpredictability of the market.
Making Money Like a Trader
Additionally, it helps investors who cannot monitor the prices throughout the day. Thirdly, it does away with emotions since the decision made is based on logic. As such, the stop-loss order is a making money management tool. A trader stipulates the stop limit based on the loss that he or she is willing to risk. On the other hand, the investor also stipulates the win limit.
For instance, he can give a pip stop limit of 50 (static stop) and a static limit of 100 pips, giving a risk to reward ratio of 1:2. The value of the static stop is informed by forex indicators such as the simple and exponential move averages.
Let us consider an investor, who purchased a currency pair when the exchange rate was 1.4500. With a static stop of 50, the stop limit is 1.4450 while with a static limit of 100, the making money currency in his possession will be traded at 1.4600. The former insulates the investor against additional losses while the latter ensures that the individual realizes his intended profit.
An investor can make several trades per day, thereby enhancing the overall winnings provided the exchanges were based on sound forex trading day strategies. In certain situations, the trader may choose to keep his position overnight.
In such a scenario, the individual earns or pays an interest. The former occurs when swap short is used while the latter occurs when a swap long is utilized.