Switching is to change direction by closing our position (cut loss) that were lost because the price moves opposite to our predictions and then open a new position following the price moves against the hope, gain the second position will be greater than the first position is already Cut Loss .
CASE EXAMPLE
Mr. X predict prices will rise from 1.2000 to 1.3000
So to get the benefits he decides to buy (Buy) now at the price of 1.2000 with the hope that prices will go up so that he can sell at a higher price / Gain expensive and gets the difference.
But it turns out instead rise in price, contrary to 1.1700 DOWN!
And after re-analysis, Mr. X concludes estimates that prices will rise turns out WRONG, according to Mr. Price. X instead of going up to 1.3000 but will drop to 1.1000.
So what should he do?
Rather than fight the market price and suffer losses and, therefore prices will fall even further than now, he decided ........
Buy closes its current position loss (Buy 1.2000, closed at 1.1700) and then open a new position Sell at 1.1700 (with the hope that prices will fall to 1.1000).
So to get the benefits he decides to buy (Buy) now at the price of 1.2000 with the hope that prices will go up so that he can sell at a higher price / Gain expensive and gets the difference.
But it turns out instead rise in price, contrary to 1.1700 DOWN!
And after re-analysis, Mr. X concludes estimates that prices will rise turns out WRONG, according to Mr. Price. X instead of going up to 1.3000 but will drop to 1.1000.
So what should he do?
Rather than fight the market price and suffer losses and, therefore prices will fall even further than now, he decided ........
Buy closes its current position loss (Buy 1.2000, closed at 1.1700) and then open a new position Sell at 1.1700 (with the hope that prices will fall to 1.1000).
And the prices continue to fall to 1.1000 so he had the advantage of 700 points (1.1700 - 1.1000) greater than the loss in the first position which closed earlier at -300 points (1.1700 - 1.2000).
Then he closes the Sell position and a profit of 700-300 = 400 points.
Then he closes the Sell position and a profit of 700-300 = 400 points.
TIPS FOR YOU
- Do SWITCHING by opening a second position opposite the first position only if the prediction gain exceeds the value of the first loss position will be closed.
- If it turns out the price changes were consistent with the first prediction, then you will suffer a loss of 2 times, the first position and the second position was also
- If it turns out the price changes were consistent with the first prediction, then you will suffer a loss of 2 times, the first position and the second position was also
CASE DETAILS
A host open position Buy GBP / USD at 1.8850 with a number 1 lot
Mr. A predicts that soon he could liquidate the position at 1.8900. Therefore he made Risk Management for position: 1.8800 Stop Loss and Stop Limit at 1.8900.
It turns erratic price moves down to 1.8820 range. With all due consideration, Mr. A wants to close the position at 1.8825 for granted. Pip Value is known that the time and cost of Rp 9200 per lot commission of Rp 50,000.
Profit / Loss = Total Lot x {((Position Close - Open Position) x Pip Value) - Cost Per Lot Commission}
Profit / Loss = 1 x {((1.8825 - 1.8850) x 9200) - 50000}
Loss = 1 x ((- 25 x 9200) -50 000)
Loss = Rp 280.000, -
After Mr. A is known to predict the price and the price will continue to move down, then Tn. A open Sell position as much as 2 lots at 1.8820.
Not long until the prices continue to fall in the range of 1.8750. Tn. A closing position at 1.8740. Pip Value applicable at Rp 9200 per lot commission and fee of Rp 50.000, -
Profit / Loss = Total Lot x {((Position Close - Open Position) x Pip Value) - Cost Per Lot Commission}
Profit / Loss = 2 x {((1.8820 - 1.8740) x 9200) - 50000}
Profit = 2 x ((80 x 9200) -50 000)
Profit = 2 x Rp 686,000, - = Rp 1.372 million, -
Profit = Rp 1.372 million - USD 280,000 = USD 1.092 million, -
