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Cut Losers

This simple concept is probably the most difficult to put into practice. Undisciplined traders quickly discard their predetermined exit point in the hopes of a quick reversal, allowing a bad trade to snowball. Moreover, every trader has seen his stops hit multiple times, only to see the market then move in his direction. After seeing this a few times, even disciplined traders often diverge from their strategy and remove the stops.

In these cases, traders have rejected an effective tool in Forex: the stop loss. Stops are placed to control downside risk. They are trip wires that save your position if the market moves against you. Not all trades are profitable. The key is strictly managing your money so that if you have a wrong trade you can trade again.


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