Trading without losses is impossible. Professional traders know this. And newcomers to the market sometimes treat losses overly emotionally, which only exacerbates the situation. Initially, you need to understand that drawdowns in trading are normal. A trader cannot trade without them. But its task is to reduce the size of drawdowns. This is what the trader should take care of. The fundamental way to solve this problem is to strictly adhere to the rules of money management. Opening trade deals with a large volume will inevitably lead to the loss of the entire deposit. In practice, it has been established that to reduce the risk of large losses, the order volume should not exceed 3-5% of the trading account amount. Every novice trader must learn this rule and follow it. Today I want to talk about the causes ofdrawdowns in trading and give some recommendations.
Reasons for a large drawdown in trading
In this article, I want to tell you about an effective market analysis tool that will allow you to make steady money. This is FDM Entry Arrows With Alerts... It belongs to the dial gauges. And this type of analysis tools is available for successful use even for those traders who are just starting to trade on the market. The indicator analyzes the location of several moving averages relative to each other, and then gives a recommendation to open a trade. It is represented as an arrow of a specific color and direction. The algorithm of this tool includes 6 moving averages. They are grouped into two groups of three MAs. Fast movings with a period of 3 are included in the 1st group. They have a different type of moving average. Slow movings with a period of 21 are combined into the 2nd group and also differ from each other only in type.
Installation of FDM Entry Arrows With Alerts in the trading terminal is carried out in the usual way, and there should be no problems with this. You don't have to mess around with the settings either, since this indicator has only one parameter, which is responsible for sound notification of the presence of a signal. You can trade this indicator on any currency pairs and timeframes.
Now let's move on to examining the trading rules.
Conditions for opening trade deals
First, let's see how this indicator looks on the price chart of the traded instrument
We open a buy deal when a green arrow appears on the chart. It is imperative to limit the possible loss. This is done using a stop loss, which is recommended to be set just below the local minimum. Profit can be fixed in two ways: by take profit or when an arrow of a different color appears. TP size depends on SL size. The ratio should be 2: 1 or 3: 1.
The procedure is similar here. Sell if a red arrow appears on the chart. The stop loss should be set slightly above the local high. Take profit is 2 or 3 times the size of the stop. Or, you can close the deal when the green arrow appears.
Everything is very simple. To improve trading results, I recommend choosing another indicator that will become a filter for FDM Entry Arrows With Alerts signals . You should try different options and test the quality of the indicator, which was discussed today, on a demo account.