As in life, trade is based on a series of selection of financial instruments focused on three fundamental issues:

  1. The first issue is about the price, which someone in a particular time, is willing to pay to get a product, service or get an investment or to engage in a relationship.
  2. The second issue is about, the expectations who has after acquired, a product, a service, an investment, or any other relationship, during a time. 
  3. And the third issue is related to the limit to which one is willing to maintain a product, a service, an investment, or any other relationship, in case it will produce negative results.

Whether is about a product, an investment, a relationship, and so on, the above-mentioned issues are always at the front line when making choices. Indeed, any choice requires answers to the questions, what is the value of a product, a service, or an investment, in other words, what is the price that someone has to pay for this product, service, or investment at a specific time period? Respectively what is the value of a relationship, in other words, what is the price someone at a specific time has to pay to get involved in a relationship?

In addition, what are the future expectations someone has for a product, a service, an investment, or a relationship? In other words, what are the expected benefits that a product can offer or what are the expected returns that an investment can have or, what satisfaction can a relationship bring to someone, over a period of time?

Finally, what is the maximum accepted tolerance limit if at some point of time the benefits, profits, or satisfaction that a product, service, investment, or relationship may offer, instead of being positive it become negative?

Those are crucial issues that if they cannot be investigated and clearly be defined in quantitative terms, then the decisions taken for selecting financial instruments contain plenty of weaknesses.

In trading, there are hundreds of trading systems that a trader can choose to follow in order to get a position in a financial instrument. What is vital is that those systems need to be able clearly to define at each specific time the Entry Price which is the price someone is willing to pay for trading a financial instrument, also to define the Target Price that indicates the expectations of a trader about the selection that he made, and set the Stop-Loss Price which is defined as the limit of negative results that may produce this selected instrument

If these prices can be determined, then a trader can select any financial instrument and enjoy the risk he takes, the profits he gets and the satisfaction he feels when trading a financial instrument. Respectively an entity can enjoy his selection for a product or a relationship over a time

In trading, these prices are defined - as discussed in previous articles - as part of the trading portfolio management mechanism cycle. In this mechanism, the prices to select a financial instrument are set as part of the cycle, in relation to other cycles:

  • the Maximum Limit of Capital Loss
  • the Optimal Trading Size
  • Profit and Loss Ratio
  • Checking Margin Requirements

fxsoriginal

If these cycles cannot be determined, then a trader, will be under constant pressure, will be confused, and lost.

Entry Price, Target Price, Stop Loss Price are the vital factors to select a financial instrument. And as they are determined by the cycles of the Mechanism of Trading Portfolio Management, allows a trader to follow a navigation path as successful trading portfolio managers do all around the globe.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. The Article/Information available on this website is for informational purposes only, you should not construe any such information or other material as investment advice or any other research recommendation. Nothing contained on this Article/ Information in this website constitutes a solicitation, recommendation, endorsement, or offer by LegacyFX and A.N. ALLNEW INVESTMENTS LIMITED in Cyprus or any affiliate Company, XE PRIME VENTURES LTD in Cayman Islands, AN All New Investments BY LLC in Belarus and AN All New Investments (VA) Ltd in Vanuatu to buy or sell any securities or other financial instruments in this or in in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction. LegacyFX and A.N. ALLNEW INVESTMENTS LIMITED in Cyprus or any affiliate Company, XE PRIME VENTURES LTD in Cayman Islands, AN All New Investments BY LLC in Belarus and AN All New Investments (VA) Ltd in Vanuatu are not liable for any possible claim for damages arising from any decision you make based on information or other Content made available to you through the website, but investors themselves assume the sole responsibility of evaluating the merits and risks associated with the use of any information or other Article/ Information on the website before making any decisions based on such information or other Article.

Education feed

Editors’ Picks

EUR/USD consolidating at lows after mixed US data, Powell

EUR/USD trades near a fresh two-month low of 1.1671 after mixed US Markit PMIs, which anyway indicated economic expansion. Fed speakers highlighted the need for more fiscal stimulus.

EUR/USD News

GBP/USD holds on to daily gains amid Brexit’s optimism

The GBP/USD pair consolidates around 1.2750, underpinned by EU Chief Brexit Negotiator Barnier's optimism on a post-Brexit trade deal. UK Business activity remains in expansion territory according to Markit.

GBP/USD News

USD/JPY: Spikes to one-week tops, around 105.25 region

USD/JPY build on its momentum further beyond the key 105.00 psychological mark. Bullish oscillators on hourly charts support prospects for further appreciating move. A sustained move beyond the 105.20-30 area needed to confirm the bullish bias.

USD/JPY News

Editors’ Picks

EUR/USD consolidating at lows after mixed US data, Powell

EUR/USD trades near a fresh two-month low of 1.1671 after mixed US Markit PMIs, which anyway indicated economic expansion. Fed speakers highlighted the need for more fiscal stimulus.

EUR/USD News

GBP/USD holds on to daily gains amid Brexit’s optimism

The GBP/USD pair consolidates around 1.2750, underpinned by EU Chief Brexit Negotiator Barnier's optimism on a post-Brexit trade deal. UK Business activity remains in expansion territory according to Markit.

GBP/USD News

USD/JPY: Spikes to one-week tops, around 105.25 region

USD/JPY build on its momentum further beyond the key 105.00 psychological mark. Bullish oscillators on hourly charts support prospects for further appreciating move. A sustained move beyond the 105.20-30 area needed to confirm the bullish bias.

USD/JPY News

BTC/USD is on the verge of a massive breakout towards $10,000 or $8,000

Bitcoin has already lost a significant portion of its dominance against other altcoins. After trading sideways for such a long time, many coins are taking advantage of the situation to create massive rallies. 

Read more

Gold: Elliott Wave downside targets point to the $1767 area

The commodities complex is taking another hit on Wednesday after a tough start to the week. The recent persistent greenback strength has been a thorn in the side of the precious metal since the dollar consolidation began.

Gold News

RECOMMENDED LESSONS

7 Ways to Avoid Forex Scams

The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?

What Are the 10 Fatal Mistakes Traders Make

Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.

Strategy

Money Management

Psychology