This made me laugh.
I download the reports from OANDA for every month and quarter of my trading. It is a really nice feature and details all of the $$’s and %’s in one easy to read format. At the end of the PDF, I noticed something new. A “Personalized Trading Feedback” letter. I thought, “Great! Maybe they have something insightful to say!” I was wrong. Read the letter below…
Trading without Stop Loss/Trailing Stop
Your open positions do not have associated stop-loss limits. Failing to include stop-loss limits leaves unattended positions vulnerable to exchange rate fluctuations. For example, your trade #xxxxxxx58 (long xxxxxxx units of EUR/JPY) was open for over 4 days without stop-loss or trailing-stop limits and was eventually closed at a loss of 268 pips.
Using stop-loss limits enables you to limit losses to a tolerable amount by setting the maximum you are prepared to lose on a given trade. Trailing-stop orders allow trades to continue to gain in value when the market price moves in a favorable direction, but automatically closes the trade if the market price suddenly moves in an unfavorable direction by a specified distance.
When setting a stop level keep in mind that you should consider the volatility of the market otherwise your stop-loss order may trigger too early on short-term market swings. You can read more about trailing-stop orders at (link)
Adding to a Losing Position
In several instances you opened new trades in a pair in which you already had a losing open position. For example, on Apr 5, 2011 22:16 EDT you executed trade #xxxxxxx63 (short xxxxxxx units of EUR/USD) at 1.425910 while you already had an open EUR/USD short position of xxxxxxx units with an average unrealized loss of 191 pips per unit. The new trade you opened was later closed with a loss of 210 pips.
The practice of adding to a losing position (also known as averaging down) is controversial as this risks available margin. Even though the market may eventually turn around and the open position becomes profitable, this ties up capital and could lead to a margin call.
On the other hand, adding to a winning position (also known as averaging up) is a popular strategy because it ensures net worth of the position is rising as new trades are opened and market continues the momentum to move in trader’s favor. Of course traders must monitor the market continuously and close open positions before a trend reversal leads to an unacceptable loss.
Please do not hesitate to contact us if you have any questions or concerns. Thank you for trading with OANDA.
Kind Regards, fxTrade Team
Don’t get me wrong; I love OANDA, however recently they have been difficult to work with via their customer service. I didn’t know they were in the business of teaching traders or recommending strategies.
This year alone I have already put my account up 20% (click for verification) in the EUR/USD using the strategies they are telling me not to use. I am not a conspiracy theorist but I do find it interesting that (in other reports) they advise the use of take profits and stop losses in your trading…hmmmm. Makes you think.
Here is what I do that they don’t like.
- I double my position if I am down over 100 pips (not arbitrarily, but at the next S or R area)
- If my trade is in the negative, but not more than 100 pips down, I only add to my position what my last trade was.
- If my trade is in the positive, @ +100 pips, I add half of my position.
- I NEVER use defined stop losses or take profits. I use %’s and feeling to determine when to get out of a trade regardless of profit or loss.
- I don’t let anyone tell me how to trade. I do it and I learn from it, good or bad.