How do You Stay Divorced from Your Financial Trading Positions?

LONDON, August 19, 2011 -

Traders are often told “don’t get married to the market”; to know when to cut a losing position and when to take a profit. However, for many traders, this is easier said than done.

Sandy Jadeja, Chief Technical Analyst at City Index (www.cityindex.co.uk/), states: “As a trader it is easy to enter a position hoping it will move in your favour forever. But at some point the market will turn and you may find yourself holding on for dear life wishing that your position would turn from red to black.”

So what can traders do to combat the pull of a moving trade?

Spread betting expert Mr Jadeja believes it is partly a matter of overcoming another market mantra: ‘buy and hold’. “Sometimes people believe that you buy a stock and simply hold on to it forever. That may be fine if the stock just happens to go up steadily. But the reality is that all markets experience ups and downs. The key to long-term success is knowing when to cut a losing position.”

“One way of doing this is to consider a fixed percentage. This involves deciding that you will never lose more than a certain percentage of your account on any one trade. You could also consider using support and resistance levels where prices have previously either accepted or rejected key levels. These often mark the line where price will either gravitate towards or move away from. This way you are at least able to see if your percentage stop loss will be adequate.”

“Ultimately whichever method we use, the key is to manage risk and not to fall in love with our positions. Our objective is to trade simply, safely and successfully for profit.”

Learn more about analysing the rises and falls of the markets with free City Index trading seminars at:

www.cityindex.co.uk/learn-to-trade/seminars.aspx

Spread betting and CFD trading are leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks.

About City Index:
Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

As a group, we transact in excess of 1.5 million trades every month in over 50 countries worldwide. We provide access to a wide range of instruments including margined foreign exchange, CFD trading and, in the UK, financial spread betting.

We constantly look to improve the performance of our platforms and expand our range of services. The result is that our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer support. Open your spread betting account with City Index at www.cityindex.co.uk/spread-betting/start-spread-betting.aspx

Contact: Joshua Raymond, City Index, +44(0)20-7107-7002, joshua.raymond[at]cityindex.co.uk