Switching is to change direction by closing our position (cut loss) that are losing money because prices move opposite to our predictions and then open a new position following the price moves against them with hope, profit second position will be greater than the first position is Cut Loss .
CASE EXAMPLE
Mr. X predict prices will rise from 1.2000 to 1.3000
So to get the benefits he decided to buy (Buy) is now at 1.2000 price in the hope prices will rise so he could sell with higher price / cost and a profit margin.
But it was not up the price, contrary to 1.1700 DOWN!
And after repeated analysis, Mr. X concludes estimates that the price will go up was wrong, according to Mr. prices. X instead of going up to 1.3000 but it will come down to 1.1000.
So what should she do?
Rather than fight the market price and suffered losses, and moreover the price will fall further than now, he decided ........
Closes his position Buy now lost (Buy 1.2000, close at 1.1700) and then open a new position on the Sell 1.1700 (in the hope that prices will come down to 1.1000).
And it kept the price down to 1.1000, so he had 700-point advantage (1.1700 - 1.1000) greater than the losses in the first position before registration closed -300 points (1.1700 - 1.2000).
Then he closed the Sell position and receive a profit of 700 to 300 = 400 points.
TIPS FOR YOU:
CASE EXAMPLE
Mr. X predict prices will rise from 1.2000 to 1.3000
So to get the benefits he decided to buy (Buy) is now at 1.2000 price in the hope prices will rise so he could sell with higher price / cost and a profit margin.
But it was not up the price, contrary to 1.1700 DOWN!
And after repeated analysis, Mr. X concludes estimates that the price will go up was wrong, according to Mr. prices. X instead of going up to 1.3000 but it will come down to 1.1000.
So what should she do?
Rather than fight the market price and suffered losses, and moreover the price will fall further than now, he decided ........
Closes his position Buy now lost (Buy 1.2000, close at 1.1700) and then open a new position on the Sell 1.1700 (in the hope that prices will come down to 1.1000).
And it kept the price down to 1.1000, so he had 700-point advantage (1.1700 - 1.1000) greater than the losses in the first position before registration closed -300 points (1.1700 - 1.2000).
Then he closed the Sell position and receive a profit of 700 to 300 = 400 points.
TIPS FOR YOU:
- Do SWITCHING by opening a second position opposite the first position only when the benefits exceed the predictive value of the first loss position will be closed.
- If it turns out the price changes in accordance with the first prediction, then you will suffer loss twice, the first position and second position also
