Forex Basic Knowledge- Floating Orders

Floating orders refer to orders in a loss state, while the owners do not stop loss or close the position in time, just taking chances to wait for the market to recover. This is the number one account killer, which is more dangerous than bulk-holding.

What is the disadvantage of floating orders?

The behavior of making a loss while taking no actions and just keeping the order unsettled is generally dominated by non-confessing mentality. Some people don't like to see negative orders on their trading history account sheets, thus once making a loss, they will wait until orders become positive to close the position. As a result, sometimes the orders may float for a few hundred points, which is terrible. If lucky, the orders will drift back, on the contrary, there will be a blow up, which is very normal. If get accustomed to floating orders every time you make a mistake, there will be a blow up as long as there is a chance to float. The foreign exchange market boasts one or two thousand-point opportunity or more per year, but the concept of buying low and selling high has affected the habit of participants, making them get used to a shock market with a few hundred points of volatility.
  That is to say, investors who are used to floating orders usually have one or two chances of selling at thousand-point per year but take no actions. Floating orders will end up with a blow up no matter how large your account is. Sometimes, your orders may finally change from negative to positive because you are not in forex long enough and haven't experienced big market fluctuations. If continues floating like this, your account will basically survive no more than half a year.
    Besides, have you made any profit even if it rises to the purchase price? The answer is no, because you missed the most suitable point to make a large profit with your account already in ups and downs, thus the best opportunity to make money just slipped away. Chances to make a big profit is limited in a year, if missed, you have to wait for the next year. How much time do you have to waste on waiting? Well, you have to watch others make money. How pathetic is that!

Another disadvantage is that as long as you have a losing order floating, it is easy to be emotional, which is very harmful for trading. For example, you short an order near a critical resistance level, which is right, but the volatile market suddenly breaks through that critical level. If not stopped in time, the order will be floating in a loss.
    Once the key resistance level breaks, the resistance level will turn into a strong support level, which means we should go long, instead of going short. However, most investors will go short and leave the market if they have orders at a loss, thinking the market may fall. As a result, they missed the chances and even may make continue going short. Looking forward to earning some money with your losing orders only leads to more mistakes and loss.

Now let’s think in a different way: the loss will be no big deal if you stop in time and catch opportunities to make other orders. It is alright if you accidentally do something wrong and correct in time. How to stop loss correctly is usually learned in a scientific and systematic way. Sometimes it is just a matter of probability that the price rises after the stop loss, which is actually helping you to capture more chances to make money. Doing foreign exchange trading is just like being a hunter, and failed stop loss is like shooting a rabbit but missed. When a shot is missed, don't continue wasting other bullets, just keep them loaded in time and wait for another bigger rabbit.

In the end, we still have to go back to the basic point, putting the flexible usage of trading principles in prior and regarding stop loss as the safety belt of your trading account. The four principles of direction, position, entry and stop loss are integrated, and you need to consider whether the direction, position and entry position are suitable, if the stop loss fails frequently. Do not simply assume that stop loss will make everything alright.

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