The Chinese have a saying or proverb, he who chases after two rabbits ends up losing both. How does this relate to you as a trader? You are about to discover the key ingredient that has made successful traders extremely wealthy. But what does it have to do with placing orders? After all, you want to make money and placing your trading orders is all that counts, you think. But wait, a study was conducted not too long ago to find out the main reason why most inexperienced traders fail to place successful trades, revealed a shocking statistic. It was revealed that young traders like you are often distracted by multiple trading positions and that lack of a single minded focus was the greatest culprit.
So, before going further on the technicalities of how to place your first order, it is very important that you take a deep breath, feel centered and focused. Focus is all you need. Successful traders are disciplined and well focused sharp shooters. They aim well and they take the best shot. Focus, focus, focus only on one currency especially as a new and inexperienced trader because as you can be easily distracted and be on the losing end of your position. In time when you are experienced enough, you can comfortably trade multi currencies across board. Chasing after too many currencies early in your learning curve will severely weaken the limited resources at your disposal preventing you from being on the winning orbit when a perfect trading swings your way.you can take the best shot when the trade you’ve been observing swings within a striking distance. As an example for this post, we will use USD/JPY.
TYPES OF ORDERS
There are basically two types of trading positions or orders available to you. The Market Orders and Limit Orders.
* Market Orders is the opening of a trade at the current market rate. Meaning that you enter a position immediately based on the prevailing conditions without any prior set of instructions to your broker. You either call your broker or you use an Online Trading Platform to place your trade right there and then. Next you have ‘Limit Order’.
* Limit Order is where a position to trade is automatically filled for you based on your specified threshold, set in advance between you and your broker or system platform. Let’s say, that the US dollars USD and Japanese Yen JPY is the currency pair that you are observing is trading at 118.10 and you believe that it will get to say 120.00, you can set an entry point to trade this currency at 118.50. This is your threshold, so immediately it reaches 118.50 your trade will be entered for you, based on your set point. There is also an exit point as well and an expiration date to all these orders placed using this type of trading position.
REDUCING THE RISK OF MARKET FLUCTUATION
Be aware that because of volatility in currency trading, the rates of currencies quoted may be slightly different at the time of execution due some undigested time lag in computer servers. This why when choosing a broker, you should consider so many factors including trading platform flexibility in order customizations. For instance, a good platform could let you optionally specify an upper and lower bounds placing a Buy/Sell Market position using this trading window. The order will be executed if and only if the applicable exchange is equal to or lower than the upper bound, if so specified. Or equal to or higher than the lower bound. A good platform is indispensable when it come to making huge money with online trading.
INSULATE YOUR POSITIONS WITH ‘STOP-LOSS OR TAKE-PROFIT ORDERS’ TRIGGERS
Savvy and seasoned traders always insulate their positions with ‘Stop-Loss or Take-Profit Orders’ so that their desired outcome is automatically effected once market conditions occur to either a minimum loss or a reasonable profit while protecting the trading capital. This will occur whether you in front of your computer or not even logged to the trading platform.
* Stop-Loss Orders liquidates a position by buying or selling the currency pair of your position when it reaches a specific threshold. This will protect you from further price decline that could wipe out your capital. This way you quantify your loss and limit your risk exposure. A good point would be the example I gave with the USD/JPY. Say you are long USD/JPY at 118.50 and your Stop-Loss is set at 117 your position will automatically close at 117 to protect your trading capital. This mechanism is significant so that when you are not glued to the computer monitor you can feel confident that your trading is protected.
* Take-Profit Orders locks in your profits and exit a trading position once your specified profit position is attained. This will ensure that you suffer no loss should a profitable trade swing against in the midst of a good uptrend. For instance you are long on USD/JPY at 118.50, you think that it will rally up to 120.00 for a reasonable profit so to protect this anticipated profit you set your Take-Profit Orders at 120.00. When your positions reaches 120.00 your trade will automatically close irrespective of potential and continued upswing. This will enable you take a profit without risking a potential reversal of the previous rally that just handed you a good profit.
REMEMBER THIS
A Stop-Loss or Take-Profit order triggers once an exchange rate reaches an instituted threshold set by you. But because of the continuously evolving nature of the exchange rate, there is often a difference in the order triggers and the real execution rate at the time the whole transaction is carried. It is possible to be off mark by a couple of points so be prepared for these things. One thing is certain, as you get comfortable with each progressing trades, you will have a good touch and reflex anticipation of favorable moves.
But nothing beats action, so open a demo account or best of all fund it and start your journey to financial success.
Do not wait for all the traffic lights in your town to light up ‘GREEN’ before you leave the house for the supermarket. You will starve if you do that. Take action today!
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A good admirer and reader of your posts. You have a way of explaining and making complex topics easier to understand. As a novice or newbie, I’d like to thank you for all your good work.