How the human brain is funny thing. Are we really able control our thoughts? Once it's programmed to do one thing, it can become very difficult to program it to do something else.



You see the main problem with our mindset is that it can cause problems when we are trained to do something in one area, but then we find ourselves doing the same thing in a situation in which this action becomes damaging. This damaging process can cause financial problems, where in other areas it can save money.

In essence this like saying in one are of life it can be a benefit but then when applied to trading it can be very damaging. So are we able to re program our brain so that it doesn't cost us money.

This is where averaging down, can cause major problems. The Stock Market is not a Shop.

We have spent most of our lives looking for the letter box catalogue, waiting for the bargains to come. Looking for when meat which is normally $14.00 per kg comes on sale at $7.00 per kg, our natural instinct to stock up. Buy as much as we can and put in the freezer, as we are saving money. This works brilliantly when we are in the shop environment, but if we look in the trading environment let's say the USD goes from $1 to $0.70, in the shop environment this is a bargain, so we are naturally going to think time to stock up. But is this really cheap?

What is the Great Trend Saying- TREND IS YOUR FRIEND

So when we look at the trend is your friend saying, it is more likely that the USD is likely to continue to fall than rally and start to go up. This is where our programmed mind is saying but it is cheap, stock up, buy as much as we can, it is cheap? This is so true when you have already brought the dollar at say $0.72 you have already programmed your mind to say the value is this price, so anything lower than this must be a bargain.

That's when the other old saying comes in, DON'T try and catch a falling knife.

So unless you plan to hold onto this stock forever it is very important that you have a stop loss in place. Why, so you don't get cut with the falling knife.

This is why the Broker that you are trading through must have stop losses and guaranteed stop losses, why so that you get slaughtered. Cut the losses and move.

The CFD FX REPORT recently researched all the brokers looking at this point of Guaranteed stop losses as one of the criteria when finding the BEST FOREX BROKER and CFD PROVIER. Visit their website for more details or email support@cfdfxreport.com

You see without stop losses we become tempted to enter into the average down trying style. This is dangerous and should be avoided at all costs. Look at the Market this year, fallen 40% if we averaged down at every 10% then we have been hit 4 times. OUCH! Not pretty and a lot of money down the drain.

We then just end up with a lot of bad stocks, forex that we are in the situation of just praying for a price rise, not because they meet our trading plan.

Please before ever entering into the Average Down Game, think very carefully as we are trading, not going to the shop. This may just save you a great deal of money.