Category: Money tips Release Date: 2006-05-07
The world's greatest trader to have a useful and simple trading rules - "Crocodile principles." The law stems from crocodile swallowed by: prey, the more tried to struggle, the more alligator harvest. Assuming a crocodile bite your legs and arms trying to break free if you use feet, then it's mouth will also bite you in the foot and arm. The more you struggle, then the deeper the depression. In the event that alligator biting your feet, be sure to keep in mind: Your only chance of survival is to sacrifice a leg. If the futures market language, this principle is: When you know a mistake, he immediately closed appearance! Not to make any excuses, justification, or something to look forward, and quickly leave!
The need for stop-loss
Volatility and unpredictability of the most fundamental characteristics of the market, which is the basis of market exists, but also the causes of the risk of the transaction, which is an immutable characteristic. Transaction never certainty, all the analysis and forecast is only a possibility, according to the transactions carried out such a possibility is naturally uncertain, uncertain act must have to have measures to control the expansion of its risk, stop-loss Thus came into being.
Stop-loss of human naturally occurring in the transaction process, not intentionally produced for investors to protect their own kind of instinct, the market uncertainty created the need for the existence and importance of stop-loss. Successful investors may have their own different ways of trading, but the stop-loss is the protection of their common features of success. World Investment Master George Soros said the investment itself has no risk of loss of control have the risk of the investment. Society Stop, Do not fall in love and loss. Stop-loss than a profit important, because any time the capital preservation is the first one, the profit of the second place, a reasonable stop-loss principle quite effective and prudent principle lies stop to prevent a loss continued to widen.
Why is so difficult to stop
To understand the meaning of stop-loss is important, however, this is not the final result. In fact, investors did not set the stop loss abounds with examples of the implementation of the market, were forced out of the tragedy played almost every day. Stop Why is it so difficult? There are three reasons: First, the chance of psychological mischief. Some investors also know that despite the trend has been Po Wei, but was too hesitant, always like to look at, wait a minute, resulting in missed their stop-loss of good time; Second, frequent fluctuations in prices will make investors hesitant to undecided, frequent stops will give investors the wrong left lingering memories, and thus shake the determination of investors to the next stop; Third, the implementation of stop-loss is a painful thing, is a bloody process is the weakness of human nature challenges and tests.
In fact, each transaction is correct we can not determine the status or error status, even if profitable, we are also difficult to determine the immediate appearance or the holders of wait and see, let alone in a fitted state. Greedy instincts of human nature to pursue each and every investor will not want to win a few points less, but do not want thanks to a few points.
Programmed stop
It is for these reasons, when prices reach the stop-loss, some investors to miss the square inch, worry about the outcome, location of a stop again and change; some investors temporary abandoned the accord, contrarian Opening, desperate attempt to restore the losses; Some investors lost money after the expansion, simply adopt the "ostrich" policy, let matters drift. In order to avoid these phenomena, I thought I could take procedural stop-loss strategy.
Major futures exchange in the international arena, often providing stop-loss order. Transactions can pre-set a price, when the market price to reach this level, the stop-loss order will automatically become effective immediately. Domestic futures exchange has not yet stop-loss orders, but can make use of advanced tools for futures trading, which is now strictly enforce the stop-loss to help investors a simple and effective method.
At present, the domestic market and some trading system can provide two kinds of stop stop stop and limit orders. Market value means the market price of a stop-loss is hit to the default stop-loss price, sending the market price immediately stop commissioned; limit stop is in the market price of a hit to the default when the stop price in order to send a delegate limit. Market stop-loss order to ensure the stop-loss success, and stop limit orders are to avoid discontinuity in the price when unnecessary losses, both advantages and disadvantages. Typically, an active species in the closing market price on the use of stop-loss orders, and in the transaction is not active stop-loss orders limit the use of varieties.
This trading system will help stop investors to develop good habits, so as to avoid market risks, so to minimize the loss, so that from being passive to being active, in the futures market in an invincible position.
