Stop loss orders are highly recommended because they are easy to use and helps protect the trader from excessive risk taking and losses.
What is it?
Stop loss order is an order gets executed to buy or sell once the asset reaches the preset price. The key usage of this is to reduce the amount of loss on a position.
Suppose you bought 1 micro lot of GBP/USD at 1.5810. According to your risk management strategy, you may place a stop loss at 1.5800. If market moves against you and price drops to 1.5800, this order gets activated and the brokerage will sell your lot at the current market price. This may or may not be 1.5800, but it should be close, barring extremely volatile conditions.
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The more you trade in forex, do you know what kind of trader you are? There are mainly 4 types of traders – scalper, day trader, swing trader, and position trader. Here, we will explore a greatly popular style called scalping.
What is it?
Scalping is a technique that requires the trader to enter and exit the positions very quickly, generally within 3-5 minutes and as quickly as 1 minute.
Scalping has gained in popularity because this style is being seen as a safer way to trade forex. Because the positions are only open for a very short period of time, the exposure to market movements is much less than the conventional trading methods.
How does it work?
This technique works by riding on the short periods of volatility. Since the market risk is low, it also means the returns are low too. Scalpers trade very frequently to make up for the small returns per trade. They trade potential high returns from long trend runs for smaller but more frequent gains. For example, if a scalper buys 100,000 units of GBP/USD which gains 3 pips before the position is quickly closed, the gain is only $30.
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