Originally posted at forexfactory on April 7, 2011:
You are right grkfx, I just suggested him to do that at the beginning to get used to the fact that you cannot touch a trade already open for a psychological fear.
This is what helped me.
Ok, I never traded more than 100 euros, because that’s what my first account is, I guess I may have more problems handling 10.000 or even 100.000 positions (not leaveraged), but as for now I’m good with it.I have to develope the “close the trade because the sentiment has changed” mindset yet. There’s a little edge between closing a trade for the fear of…
Yes I know what you are talking about. It is standard trader psychology and money management strategy to make sure you follow your trading rules and let the trade play out.
I am just saying that for true order flow traders then they operate at a slightly different level, or completely different level, depending on how you look at it. You won’t be able to get there at the beginning, but you should be able to grow into it.
So for example you have a trade on, and it has a 100 pip stop loss on, and the trade is bobbing in and out of profit. All of sudden you decide to exit the trade at -10 pips loss because you notice the fundamental value has changed. Since you know the fundamental/sentiment has changed that means it threatens your stop loss 100 pips away. So the prudent measure would be to exit the trade at the 10 pip loss instead of the 100 pip loss. In an ideal situation you would reverse and take the opposite side of the trade as well.
This is holds especially true when you are daytrading and trying to be nimble with leveraged pips. You need to figure out when the fundamental/sentiment value changes and when your stop is going to get smoked. You won’t always be able to do it, but a few occasions here and there can save you pips.
Now I usually don’t use it that much for exiting trades at small losses. But I usually use it a lot when knowing when to take profits. You could be sitting on a few hundred pips profit, but your trailing stop has not gotten hit yet. Your order flow knowledge shows you something and tells you its time to take profit, or else a lot of your paper profit can evaporate.
I operate under the principle that the market can change fundamental/sentiment value in an instant if the right order flow conditions/scenario presents itself. The market at any moment can decide to make a 30 pip move, 50 pip move, 100 pip move, or begin the trend for a 1,000 pip run, etc in both directions. It is all about order flow and liquidity.
You won’t be able to do it in the beginning, but you should be aware of the ideal situation, ideal order flow trades, ideal order flow mindset so you can eventually grow into that new ‘you’.