Finance

How Do You Know When to Cut Your Losses if a Trading Session Is Seemingly Moving Against You?

How Do You Know When to Cut Your Losses if a Trading Session Is Seemingly Moving Against You

Trading on the world financial markets is something more and more people are doing. That is simple to understand when you consider how easy it is to get into, the excitement it brings and the possible financial rewards on offer.

As shown at AskTraders, a big part of trading is knowing how to be a sensible investor. If you need a little help in this area, the AskTraders’ website is a treasure trove of handy guidance and common-sense trading tips. Working out how to trade sensibly is a core skill any investor must develop in order to have longevity in this industry and to look after their finances.

One common example is knowing how to cut your losses when a session seems to be going against you. But how do you know when it is time to do that?

Look at the chart data for guidance

Just as you should always know what to do as a property owner when you buy a house, traders should know when it is time to cut their losses in a losing session. One way to do this is based on what the facts indicate; by looking at the latest price charts for the trade and interpreting the data in an objective manner. If the price has steadily gone against you over most of the day, then it suggests cutting your losses might be wise. That is certainly the case if the candlestick patterns also suggest the trend will continue.

Losses are mounting up

If a trade session is seemingly going against you, cutting your losses until another day is wise. One useful way to know when it is time to do so is if your losses are becoming too big to handle. You might also consider bailing out if your pre-defined loss limit is about to be hit. While it is usually a good idea to let this happen automatically (in case the trade does turn in your favor at the last moment), you could manually exit the trade if you are sure this will not occur to reduce your deficit.

Feeling stressed, anxious or tired

Trading in a responsible way is very important and this means knowing when to cut your losses in a seemingly losing session is vital. Another way to know when this might be needed is to simply listen to your body. If you notice you are getting overly anxious, stressed or tired as the session wears on, then it is time to stop.

Knowing when to stop is important

Lots of advice around trading centers on knowing how to make the best profit. While, of course, that is important, it is also wise to learn about losing trades, poor sessions and when to cut your losses. This will not only help you avoid trading when you should stop but also protect your bankroll.

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