Do you know the “1:3 rule” while trading Forex online? Here is a simple Trading Tip for you…

November 9, 2017

This Trading Tip may be able to help you earn more!

Do you know the “1:3 rule” while trading Forex online? Here is a simple Trading Tip for you…

Here you will find tips on the trading world, and how to make the most out of trading stocks, Forex, commodities and indices. There will also be information on breaking news, and how it might affect the market and your trading.

For our first post, let’s start with a Trading Tip.

We know that when placing a trade, it’s important, and always advised, to set a Stop Loss and Take Profit limit. Doing so minimizes your risk, and helps you lock in potential profit.

But how do you know what limits to set?

In general, you want your Stop Loss to be at least as big as the average daily pip movement for the instrument you are trading.

For example, if you are trading GBP/USD, the average pip movement between the London and New York trading sessions is 115 pips.

You want your Stop Loss to be bigger than this number so your trade has some leeway and time to make money. But what number should your Take Profit be? Follow the 1:3 rule.

“When trading, there will be time when you win, and times when you lose”

says Patrick Orini, chief trading analyst.

“What makes a good trader is someone who lets their winning trades win all the way. That is why we recommend setting your Take Profit level three times higher than your Stop Loss.”

Why does this help? This strategy lets your come out on top, even if you only place a winning trade 1 out of every 3 times.

So when you trade smart, you take all you can.

When setting your Stop Loss and Take Profit limits, keep in mind both the average daily pip movement, and the 1:3 rule. Happy trading!

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