Warrants STOP and LIMIT Now get acquainted with useful trading tools

Warrants STOP and LIMIT

Now get acquainted with useful trading tools allowing a certain extent, protect you from unexpected losses and to fix the planned profit.

This is - STOP and LIMIT. In a previously opened position at any time (during working hours of the market) you can put an indication to close it when the price of currencies of some specific value. For example, you open a position, hoping that the quotes will go up (as scheduled). At the same time, to insure themselves against significant losses, with significant price movement downwards, especially in a situation where you do not control, or you can lose control over the market, you are betting STOP, ie specify a value price below its current value at which your position must be closed without further guidance. Similarly, if you open down, you specify the price above its current value. In this case you should keep in mind that if the STOP will be too close to the current value, then the random prices can rebound to close with a loss of open positions right, and if too far away - losses can be unreasonably high. In turn LIMIT - this is referred to your quote above which the position will be closed with a profit, ie Quotation of LIMIT - is always higher than the current value, if you play up, and below - if you play down.

There is a very common mistake that make almost all new traders. We must always remember to quote what - BID or ASK to be executed the warrant. Consider the example positions BUY. As stated above, the position is opened by BUY ASK, and closed with a BID. Ie STOP or LIMIT will be performed only when the BID will reach the specified price. Since ASK the graph is always higher than BID, then the graph is always HIGH ASK, and LOW - BID. Therefore, the schedule must pass LIMIT the amount of spread before LIMIT will be executed. A STOP will most likely be executed as soon as the schedule will affect prices. Typically, novice traders can be very surprised when they discover that their LIMIT is not successful, despite the fact that the HIGH graphics on several points higher than the price LIMIT'a. It must be because HIGH should be higher than the LIMIT is not less than the amount of spread.

Another common mistake sostot that the trader does not understand the difference between an indicative timetable, being built on information quotations, ie Entry from many hundreds or even thousands, of banks and brokers, and quotations of the company, with which he works. In an indicative timetable quotes are much more frequently and have greater variation than that of each of the brokers alone. Moreover, different brokers, even an indicative timetable different from the fact that they use for their construction of different suppliers. Therefore, to understand why worked or not worked out a warrant must, first of all, look at the charts from the broker with whom you work. Besides, better to build the schedule only for his own, if such an opportunity is provided, quotes. In AFMCharts to do this, specify the source code «AKM».