Ok, so I’ve set my stop loss limit to allow a little wiggle room – I am confident this trade is going to go my way. A stop loss is a safety mechanism that will automatically close your trade if your loss gets beyond a certain point. A stop loss is very important when you trade, because it helps you preserve your capital. Always remember – capital preservation is rule number one in this game – always live to fight another day!
Because I have set up the trade on a 4 hour chart, it will be a shorter term trade. So, I’ll need to monitor events closely. I’m targeting a modest 30 PIPs on this trade at $10 per pip – in and out like a kung fu ninja! A pip is the smallest unit of movement on a currency pair. So, for example, if you trade at $1 per pip, and the price moves 30 pips you just made $30. Currency pairs can move over a hundred pips in a single day (more or less depending on what’s going on in the wider markets).
12.30 – 1.30 Time to grab some lunch, and let my brain get some much needed rest.
1.30 – 5pm Wheeee! The trade I got into this morning is in profit. By 10 PIPS. I’m quite happy about this, it’s going well. But then, my indicators did say this was a nailed on certainty.
Now that I’m in one trade, I look at what’s going on with some of my longer term trades – when you trade forex, you’ll discover that some of your trades may last hours (or even minutes), while other ones will be longer term, staying open for several days or even weeks. Typically, the longer time frame that you trade on, the longer the trade will stay open.
I have 2 other trades open that I had started before today. One is showing a nice 50 PIP profit but one is showing a loss for 20 pips – this is irritating me a little, not so much because it’s losing money but because it had at one point been at a profit – but rather than secure that profit I got greedy and wanted more. Damn! As a forex trader, you must control the two biggest emotions that will affect your trading – fear and greed. If you can do this, you should win in the long term, and by quite a distance.
I drum my fingers on the sofa, because this trade is now 10 pips away from the stop loss that I set. If it goes 10 more pips away from here, it closes at a loss. I start cursing at myself.
While I’ve been fretting about the losing trade, I’m completely oblivious to my morning trade which has now hit the 30 pip profit target. My mood immediately swings, and I’m happy again because I book the $300 profit, punching the air as if I just scored the winning touchdown at the Super Bowl. As far as highs go, I may as well have – a winning trade gives you a feeling of savage delight.
Before I have time to enjoy the moment, my laptop alarm sounds off – it’s the horrific sound that is made when a stop loss is hit. So, within moments, I’ve had one winning trade, and one losing trade. Good thing I’m still up. I look at the only open trade I have – now showing a 45 pip profit. Determined not to make another mistake at losing the profit on this one, I book it.
I’ve made a net profit for today. My capital has grown a little bit more. It’s now 3.45pm – content with the trading day, I power down and head on out to enjoy some of my spoils.