Price effect

Forex traders need to know when to cut their losses. This is difficult for inexperienced traders, and they often lose large amounts of money by holding on to unprofitable positions. This is the price effect, and you need to avoid it.

Here’s what happens:

• You spend days analysing a currency and decide it should go up
• You’re so convinced that you decide to make a major investment
• You wait until the timing is exactly right and invest most of your available funds
• Your order is filled
• The currency starts to go down
• You check if anything has happened that could account for this
• There isn’t and you decide to hang on
• The currency goes down further