Do You Protect Yourself?
Are you asking, what does Cynthia mean by ‘ do you protect yourself’?
Well, you always protect yourself when you drive by wearing a seat belt….you always protect yourself when you are on vacation… you always protect yourself when you are swimming in oceans, rivers, and lakes… you always protect yourself when you enter into a relationship… you always protect yourself when you lend money to your friends and family…etc.
So when you invest in the Forex market or in any trading avenue, you should always protect yourself – period!
Successful traders have learned to always protect themselves when they trade. Protecting yourself as you trade can be done by placing a protective stop loss order in the market at the time you execute the trade.
Protecting yourself as you trade is quantifying how much you are willing to lose before you enter the trade to ensure that you do not lose more than that amount.
To sum it up, if the trade does not work out according to your plan, you should be able to emotionally and financially survive without that loss substantially affecting anything in your life.
Protecting yourself at all times, and in every trade, needs to become a subconscious habit. It should become every bit as mindless as avoiding walls when you walk. Never trade without looking at the downside first or the opposite side of the risk you are taking. You should never trade without asking yourself, “If this trade does not work out, can I afford to lose X amount of money?”
Protect yourself at all times and if you take a financial loss, don’t take it personally. Emotions control most traders and when you let your destructive emotions get involved, it may become hard for you to make any money as a result of your trading efforts.
As you trade, you must never forget that security in the market is a myth. It does not exist. Trading without protective stop loss orders is outright exposure to financial self-destruction. Trading without a protective stop loss order is a bad habit to begin. It is when you don’t protect yourself that you will open a door to one of the scariest rooms you will ever walk through in your entire life.
As you learn to trade and get a little experience coupled with successes under your belt, you’ll step into an arena of false security. That is why people drown in the ocean. They swim with insufficient respect and knowledge about what the ocean can do (a false sense of security) based on a feeling. They have the feeling that they are greater than the force of the ocean and it is at this point that they drown. The sad part is that the ocean meant to do no harm. It was just doing what it does. It was simply carrying on as it always has.
Like the ocean, the market exists with no feelings. Without the proper knowledge and respect for the market, you too can drown from a financial standpoint. And if you do drown, the market will feel nothing! Why? It can’t feel and it can’t care.
Trading without a protective stop loss order is being ignorant to the realities of the damage the market can do to you psychologically, emotionally and financially. If you enter the market without protecting yourself first, you are the perfect candidate for a catastrophic, life-altering event in your trading career. I want you to know that this holds true for both novice and experienced traders alike.
There are unforeseen events like the September 11th terrorist attacks which unexpectedly moved the currency market 500 to 1,000 pips in an unplanned direction. Or when the Swiss National Bank decided to unhinge the swiss franc from the euro in secret in January 2015 and caused a huge sudden move in the CHF, which left traders and even some brokers bankrupt.
Although these instances do not occur every day, fundamental announcements occur often. Like increases or decreases of interest rates after the U.S. Federal Reserve or a bank holds a secret meeting about the economy, or the Non Farm Payroll report every 1st Friday of the month at 8:30 am EST. These announcement results can change market direction rather quickly. This is why your protective stop loss order is so very important in helping you achieve your vision of Forex success, by protecting your trades and emotions.
Setbacks and failures are a part of life. What we don’t want is a setback so devastating that it changes our lives forever. This illuminates the true value of the protective stop loss. When it is time to execute a trade, you can never really quantify how much you could make in a trade, however, you can always quantify the largest amount you are willing to risk or lose in a trade should the trade not go your way.
This forex girl knows she always needs to protect herself!
A trading friend of mine once said that trading without a stop loss is like a guy saying to a girl, ‘we don’t need protection, don’t worry, you won’t get pregnant’!
If the girl is smart, she’ll insist on the protection or she’ll walk away.
You need to be smart in your trading….use a protective stop loss or don’t do the trade.
If you like this subject, please CLICK HERE to visit my other webpage called ‘Healthy Trading Psychology’…. AND download my FREE PDF that will teach you how to trade like a Samurai Warrior!
Dedicated to your trading success,
Cynthia
Trading from the beaches of Mexico! You can too!
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