Learn to Manage Your Risk
By using the right risk management tools, you can develop a strategy to minimize potential losses without affecting your profit potential.
Experienced traders use Limit Orders and Stop/Loss Orders as the cornerstone of a well-developed trading strategy. By setting both orders on all their positions, they remove emotion from the equation and are allowing management tools to work for them.
A limit order instructs the system to automatically exit a position when your target profit has been achieved. This enables you to “lock in” your desired profit on a winning position.
A stop/loss order instructs the system to automatically exit a position when your maximum loss limit has been reached. This enables you to cap your losses on a losing position. As a general rule of thumb, your Stop/Loss Orders should be set closer to the opening position price than your Limit Orders.