Using Proper Stop Loss in Forex Trading

You know, among all the financial markets, forex market is the most leveraged one. While most forex brokers provide 100:1 leverage to everyone, you can find a broker with 200:1 leverage option too. The extreme amount of leverage can make the trading very lucrative or very dangerous. Forex traders can double their investment overnight, while it is also possible to low up a high-margined account within hours. Everything depends on the traders themselves and their chosen leverage size.

In the high-leverage market, putting proper stops is the only key to save your account from getting blown up. If you trade without stop loss, it is almost inevitable that you will be margin called at some point of your trading career. The possibility of using high leverage ratios and therefore, multiplying the investment size makes most investors unconscious about the importance of employing proper stop loss in each of their trades.

Interestingly, some forex traders make use of the others stop loss policies. As human beings, we are naturally attracted to round numbers, numbers ending with 00 or 50 etc. Some cunning traders know that some investors will place their stop at these levels; they place their orders at slightly higher or lower of those round numbers. As a result, the ordinary investors get stopped out, while some traders get their targets met. When you have decided to be a forex trader, you should arm yourself against such traders and have a detailed stop loss policy for your trades.