As in life, trade is based on a series of selection of financial instruments focused on three fundamental issues:
- 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.
- The second issue is about, the expectations who has after acquired, a product, a service, an investment, or any other relationship, during a time.
- 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
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.
Editors’ Picks
EUR/USD hits two-day highs near 1.1820
EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.
GBP/USD reclaims 1.3600 and above
GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.
USD/JPY drops back below 157.00, as focus shifts to Japan snap election
USD/JPY is back in the red below 157.00 in the Asian session on Friday. The Japanese Yen recovers ground against the US Dollar amid some profit-taking ahead of Japan's snap general election on Sunday. The preliminary reading of the Michigan Consumer Sentiment Index report for February will be released later on Friday.
Editors’ Picks
EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates Premium
The EUR/USD pair lost additional ground in the first week of February, settling at around 1.1820. The reversal lost momentum after the pair peaked at 1.2082 in January, its highest since mid-2021.
Gold: Volatility persists in commodity space Premium
After losing more than 8% to end the previous week, Gold (XAU/USD) remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000.
GBP/USD: Pound Sterling tests key support ahead of a big week Premium
The Pound Sterling (GBP) changed course against the US Dollar (USD), with GBP/USD giving up nearly 200 pips in a dramatic correction.
Bitcoin: The worst may be behind us
Bitcoin (BTC) price recovers slightly, trading at $65,000 at the time of writing on Friday, after reaching a low of $60,000 during the early Asian trading session. The Crypto King remained under pressure so far this week, posting three consecutive weeks of losses exceeding 30%.
Three scenarios for Japanese Yen ahead of snap election Premium
The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.
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