Secrets of tracking positions on Forex
The correct determination of entry points, exit points, loss stop setting levels and teak profit can be a real headache for a beginner trader on Forex. Today we will try to understand what are the options for entering and leaving the position, as well as discuss ways to modify warrants and manage open positions.
Entrance to the market
Any trading strategy starts with the idea of how to enter the market. This is usually the starting point for developing a trade strategy of any complexity.
Usually, the entry on the trading strategy of the trader is associated with a specific set of rules: if something and something happened, it is possible to enter into a purchase transaction. The rules themselves do not arise from the vacuum and usually the algorithm here is:
- The trader reads various literature, attends forums on the network and blogs, communicates with colleagues. At some point, various ideas in the format "what if you try to trade an ascending triangle by the rules I read today?" come to it;
- Then check on historical data to identify the optimal set of rules for entry, exit and item maintenance. This is usually done using special manual testing programs, such as Forex Tester, or МТ4 terminal add-ins that allow manual testing;
- After testing the idea, the trader has already decided whether to use the developed strategy in his trade.
The strategy of entering the market can be very different - the usual entry on the rollback, on the trial of a certain price level, on the news, on the Price Action pattern and so on. Depending on the strategy, the appropriate order types are selected. For break-through strategies, these are deferred Buy Stop and Sell Stop warrants or market ones, for strategies on kickbacks sometimes use Buy Limit and Sell Limit and so on.
I can 't help but mention that aspiring algotravers often use deferred warrants in their advisers without taking care of the consequences. Quality testing of advisers using deferred warrants requires a quality teak history. Otherwise, those warrants that would not be activated in the real account would be activated on the test and vice versa.
Exits from the market
Getting an input signal is pretty easy. Before entering any deal, we know exactly what needs to happen to form a signal, and, if market conditions coincided with the rules of our system, we will get the correct input signal. The entrances are simple because we can set all conditions for them in advance, and the market must come into line with these conditions, otherwise the deal simply will not be open.
When we are in a market with an open position, the number of likely scenarios of what can happen to our deal is infinite. It would be extremely naive to hope for an effective return in all trade situations with only one or two simple exit strategies. Yet all I see in forums and descriptions of different trading systems is, at most, a couple of rules to get out of position.
Good exits from the position require enormous work on their content, and simple monovariant exits are far from as effective as a series of well-planned exits, which provide many possible options for developing the situation.
As you will recall, the very first task of the trader is to protect capital from any catastrophic losses. On the other hand, if you worry too much about losses, you can start closing deals early at the slightest hint of reversal and thus miss potential profits. Thus, it is very important to maintain a balance.