No matter in foreign exchange, gold and other investment transactions, as well as in stocks and futures, it is impossible to make even losses.
There must be some profit and some loss, so whether it is profit or loss, we need to do a good job to stop profit or stop loss.
But do you know the reason for profit and loss in forex trading?
When you are trading, have you ever had this situation: you often look at the balance in your account and feel happy when the balance is in surplus, but you start to worry when the balance is in deficit and wonder whether you should leave early?
Or after a few days of losing money, you begin to doubt your trading system and consciously start to change the way you order.
This is actually a trading trap called outcome preference.
Many people will think that the above behavior is human nature, there is nothing suspicious, trading is not the future money, what is wrong with staring at the money?
No, outcome preferences can be very damaging to traders, and some people don’t even notice them.
It can cause traders to become short-sighted and panic over temporary losses, which can affect the trader’s mindset, lead to wrong decisions, and even make the trader forget the trading system he has proven with countless trades.
Here’s a look at exactly what consequences bias can do, and how we can overcome them.
If you focus too much on the outcome and too much on the money during the trading process, it’s easy to do something wrong.
More common are the following four kinds: 1, early stop profit many novices at the beginning of trading, in the face of floating profit, are afraid of a sudden reversal of the market, so that floating profit into floating loss, so this part of people often close, when there is a part of floating profit quickly close the profitable position.
As a result, big markets are often missed.
Watching the market go higher and higher, but in the early exit, and behind the market missed.
2. Frequent stop-loss because of fear When traders lose enough money, they move to the other extreme — the fear of losing money.
The list appears a little float loss will touch the nerves of traders, when the float loss is rising bit by bit, the psychological pressure of traders is more and more heavy, even if the loss is still within your range of bear, will be too worried, so as to forget that they have set a stop loss, blind stop loss in advance.
This kind of psychology is also easy to be used by some main force, deliberately put the price of the technical stop loss.
3. Failure to cut Losses Quickly As mentioned earlier, many traders are afraid to run away when facing a gain, but when facing a loss, traders have the opposite mentality.
Always thought that carry for a while, as long as the unbalance, floating losses will not become real losses, can wait for the reversal of the market.
This may work in the stock market, but in leveraged markets such as forex or futures, it will only cause your paper capital to shrink and even explode.
4, greed is human nature, in the market, the human character defects will be significantly amplified.
As a trader makes many profits, his confidence in himself becomes higher and higher, and he tends to become more and more greedy, thinking that he can eat a lot of profits.
As a result, they often miss the best timing.
They think, now the market is so good, so little profit out of the pity, should continue to hold.
The result was to turn profitable trades into losses.
All four of these common missteps come from the same source: traders are too focused on results, on the temporary gains and losses of their accounts.
What if you avoid outcome preferences?
So how do you avoid falling into this trap?
In a nutshell, stop thinking about the outcome of each trade you make and focus entirely on the process.
So how do you do that?
Trading is rigorous work, and the quality of every decision you make is critical to the facts of the trading process.
A trader should plan ahead for every trade, such as gauging current market trends, calculating positions based on his/her profit/loss ratio, and setting up stops or gains.
We should refrain from doing anything that is not part of our trading plan, such as seeing a loss on our order but trying to close it before we reach the stop.
At this time, you should pay attention to your own hand, regardless of the profit and loss, strictly follow the plan, if the final profit, it means that your judgment is right, at least know that you are wrong, you should do is to find out their mistakes, rather than forcibly stop the transaction before the end.
If you do something unplanned during the trading process, it is also wrong to do it right.
A thorough trading plan is the most effective way to control impulse and frequent trading.
Once you get into the habit of casual sex, it will only make you go bust faster and even bankrupt.
In addition, if a well-planned trade is not strictly executed and a move is missed, the trader will get nothing but frustration.
The market is always changing, history does not repeat itself, trying to predict the market is a very low behavior.
Let’s not try to figure out how to correctly predict the market. Let’s just focus on the signals the trading system sends, and consider how to get out when the market is moving against us.
Uncertainty is a fundamental characteristic of markets, so all predictions are meaningless.
We can study the current trend of the market and follow the trend of the market, but never to predict the next second will be up or down, predicting the market will only make you faster to sell out.
Strictly follow the signals from the trading system, build positions according to the plan, cut losses and exit. When you can trade strictly with your trading system, it is only natural to make money.
Control Your emotions For traders, your emotions also affect the execution of your trading plan.
The mood of traders often fluctuates with the market fluctuations, especially when there is a large floating profit and loss, which will directly affect the final trading results.
After a few failures, negative emotions can seriously undermine the confidence of traders in their trading systems and make you fearful.
The best way to keep your emotions in check and avoid these pitfalls is to review, summarize, and practice.
The change of mood is related to many factors, such as your own psychological quality, or unfamiliar with the market and so on.
At this time, it is necessary to contact more, to summarize more, to spend more time on research and learning, rather than blindly underground and staring at the plate.
When your position is relatively heavy, because the risk is too big, it is hard not to care about every time the floating profit and loss.
At this point, your emotions become more intense, you forget your plan, forget the trading system.
Heavy positions are often one of the biggest killers of failed trades, and with leverage, a single heavy trade failure can leave you with nothing.
On the other hand, when you trade light, the maximum loss is within your tolerance range, and even if you have a loss, you will not have much psychological pressure, because you still have plenty of opportunities to come back.
Instead of focusing so much on the profit and loss of your account, you can get back to thinking about better entry, stop or exit points.
In conclusion, in trading, don’t pay too much attention to the profit and loss of account capital, but should pay attention to the trading process, as long as you do every detail of the transaction is done, making money is natural.
2. How to calculate the profit and loss of foreign exchange trading?
Foreign exchange trading profit and loss calculation formula, how to calculate foreign exchange trading profit and loss?
FW Finance Xiaobian talk about foreign exchange trading profit and loss how to calculate.
For the calculation of direct profit and loss, we look at the currency pairs behind the US dollar, such as the pound/USD, the euro/USD, and the Australian dollar/USD.
A standard contract (1 hand) is a $100,000 contract, and the value of each dot is $10, so if we make a standard contract and the market moves by 1 point, our profit is $10.
Similarly, a mini contract (0.1 hands) makes a mini hand, the market moves one point, and the profit is $1.
1. USD is the combination of target currency, such as EUR/USD, GBP/USD and AUD/USD: Profit/loss =(opening price – closing price)x contract unit x contract quantity, point value = contract unit x0.00012, USD is the combination of benchmark currency, such as USD/JPY,
USD/CHF and USD/CAD: Profit/loss =(opening price – closing price)/ bid price x contract unit x contract quantity point value = contract unit x0.0001/ bid price, (Point value of USD/JPY = contract unit x0.01/ bid price)3. Cross currency mix, such as EUR/GBP,
EUR/CHF and EUR/JPY,
GBP/JPY: Gain/loss =(opening price – Closing price)x contract units x contract quantity x target currency EUR/JPY or GBP/JPY point value = contract units x0.01/USDJPY bid EUR/CHF point value = Contract units x0.0001/USDCHF bid EUR/GBP point value
= Contract unit x0.0001xGBPUSD Offer price In foreign exchange trading, to keep abreast of the trend, the more you know about the market, the more confidence you have in investing.
Remember, when you enter or exit a trade, you must clarify the “bid/ask” price spread.
When you buy a currency, you perform the ask, and when you sell, you perform the bid.
Therefore, there are losses and gains in foreign exchange trading, but you need to seize the opportunity to find the entry and exit points, in order to perfect entry and exit.
