Traders spend hours fine-tuning entry strategies but then blow out their accounts taking bad exits. In fact, most of us lack effective exit planning, often getting shaken out at the worst possible price. We can remedy this oversight with classic strategies that can enhance profitability. It is obvious that Most forex traders try hard to choose the best trading opportunities, but they sometimes forget to plan when to exit or exit the market. Even if you think about it, what's the point of entering at the right time and executing correctly but the losses can't be minimized and the profits can't be maximized？
As we most of the time discuss, the forex market does not always go according to your expectations. Even if you have done thorough fundamental and technical analysis, there is still room for unexpected events to occur, or the possibility for the price to react beyond your expectations.
What if that happened？ If, for example, you are in profit, do you have a plan to let profits continue to float or close your profits？ By not preparing to get out of the market, you are planning for a failed trade. Negative emotions such as fear and greed can overpower you in the heat of battle in the market. It is appropriate for forex traders to have an exit strategy or a market exit strategy like the following:
• Use Stop Loss and Profit Targets From the Beginning
Stop Losses can limit losses. Take Profits allow the user to maximize profit by exiting a trade as soon as the market is at a favorable price. If you're just starting out trading, or if you're the type of trader who often takes a position and then forgets about it, then it's very important to plan for an exit market from the start. You will exit the trade when the price reaches a stop loss or take profit point that suits you. Of course there are various ways to choose your stop loss and profit target. This will depend on factors such as the ideal trading setup or risk management. Some traders choose to maintain profits by leaving positions open rather than closing them. Actually it's not a problem. But don't forget to set a stop loss!
• Trailing Stop
If the price goes your way, and you want to keep the trade while protecting your profits at the same time, then use a trailing stop. A trailing stop is a stop order customized to your liking to secure more profit. Tips for using a trailing stop are to move it in the direction of price movement and not away from it. However, you cannot use a trailing stop to limit losses when your position is in a floating loss condition.
• Dynamic Profit Targets
As briefly mentioned earlier, some traders also adjust their profit targets to maximize wins. This can be used in conjunction with a trailing stop to reduce risk while leaving a position open for more potential profit. For example, if you find that a currency pair is breaking one support level after another, you can partially close your position while continuing to hold on to the rest until you reach your profit target. This method is also useful for trading strategies that require adding positions. However, as always, don't forget to apply proper risk management, otherwise you don't want to lose everything especially if the market suddenly reverses.
• Using Time
Have you ever had a moment when you kept monitoring the price movement by keeping an open position and found that the price didn't move much？ If so, maybe there are times when you trade using a time stop or time limit to get out of the market. With early exits you can allocate your trading capital to better trade setups and opportunities. If you continue to struggle in a sluggish market, later you can lose trading opportunities that are much more profitable. But this also depends on your trading style. Day traders often set time stops to exit trades at the end of the session. Some traders decide to close all positions before the weekend so as not to disturb their rest later.
• Sudden Out of the Market
Lastly, there is always an option to exit a trade in the market when conditions have changed. Traders make entries based on certain analysis, be it technical or fundamental, so they can decide to exit the market when all of them are no longer valid.
However, this approach can vary from person to person and requires active monitoring of market conditions. You don't have to stick to one type of strategy to get out of the market. If the market situation doesn't look good, you can get out of the market immediately.
Conclusion
In essence, there is no perfect way out, sometimes we decide to leave the market too quickly even though the price is still moving. You need to use an exit strategy that suits your trading plan . Over time, as your trading builds up, it will become easier to find out which exit strategy is best for you.
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