High frequency trading on the financial markets can be an exhilarating ride, but it can also be a rather expensive ride if you either do not have a plan, or you have a plan but it is a very poor plan! Also, you need the right mindset if you are going to do high frequency trading, because you are going to have your fair share of losing trades to go next to your share of winning ones.
With high frequency trading you need to be able to think on your feet, but have a very clear plan of how you are going to trade. In other words you need to decide which signals you are going to use in order to buy or sell a currency or other product, and you must have very clear and precise entry and exit points. It is important you set out some rules for yourself before you start trading, otherwise if you act in a haphazard fashion sooner or later you will be heading for a big fall.
So always put a stop loss in place that is the maximum that you can afford to lose on any particular trade, and never be tempted to move this stop loss further away, the only time you want to move your stop loss is if you are moving it to a break even point, or if you are locking in some profit into your trade. A trailing stop loss is in fact most useful, so you can stay in a successful trade, but lock in some profit in case the market starts to go against you.
Either use a trailing stop loss or have a set exit point for your trade where you pick up your profits. It is all very well being in profit on a trade, but sooner or later the tide is going to turn, so you must take your profits and give yourself a slap on the back and be happy with what you have in the bank!
With high frequency trading, it is probable that you will have more losing trades than with other ways of trading, but then again the rewards can be bigger also. So it is very important to be able to take those losing ones on the chin, do not let them turn into big losses, and then move onto the next trade. Never let your guard down and always treat the market with respect as it will come back and bite you.
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