During trading discussions traders often talk of which currency to get into, but rarely do they speak about how or when to exit.

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Exiting from a trade is arguably more important than the entry, as the exit is what determines the profit. By learning multiple methods for exiting a trade the trader positions them self for potentially locking in greater returns. There are several useful methods for exiting a position, all which are easy to execute and can be implemented into a trading plan.

4 take profit exit strategies to make you a better trader - Smart Forex Learning

Trading forex can make for a confusing time organizing your taxes. These simple steps will keep everything straight. See Forex Taxation Basics. Introduction To The Forex Market. Stop-Loss A stop-loss order is a very common way to control risk and exit a position if it reaches a point where we are unwilling to absorb further losses.

A stop-loss is placed at the time of trade, and figured out before hand.

There are potentially many methods for picking a stop-loss rate, but ultimately it must be at a place where the trader does not reasonably expect the market hit before putting the trader in a profitable position that warrants just reward for the potential risk taken.

The stop-loss order may be placed based on recent support or resistance levels. A stop may also be placed based non-traditional support and resistance levels. These would include Fibonacci retracement levels or trendline support levels. Therefore a stop would be placed at the Alternatively the trendline could be used as prices will likely find support at the trendline also at 1.

If using a trendline for a stop-loss it is important to note that the rate will change over time as the line is sloping. Trailing Stops The use of the trendline as a stop-loss tool mentioned above is an example of a trailing stop.

The stop will move closer to the entry point as the currency moves in the trader's direction. In other words, the trailing stop is dynamic and will change over time. A trader may also do this as new support and resistance levels are formed as the currency moves in their direction. The trailing stop attempts to lessen risk if the currency initially moves in a trader's direction but then fails to follow through. It also attempts to lock in a minimum amount of profit if the rate moves substantially enough for the trader to move the trailing stop to a profitable level.

Trailing stops should only ever reduce risk, and should never be moved further away from the entry price increasing risk.

Figure 3 shows how to implement a trailing stop using support and resistance levels. The trade moves favourably, but then a rally occurs.

When the rates move back below the former low, the downtrend is intact and the stop is dropped to just above the new resistance level, at 1. The stop has "trailed" the price action and in this case has guaranteed a 60 pip profit as the trailing stop is now below the entry price. Dissolution of Entry Criteria An often overlooked exit method is to simply exit a position when the original entry criteria no longer exists.

This is especially useful when using technical indicator signals for entry. Take for example a trader whose method involves entering positions as volatility increases in an attempt to capture large quick moves. The trader may use an average true range ATR indicator to assess average volatility.

A trader takes a short position in anticipation of quick profits, which quickly come. Among many potential exits, a simple one is to simply exit when volatility begins to retract. After all, if volatility retracts the original premise for the trade, the trade should be exited. Timed Exits The timed exit is a relatively straightforward one. Prior to taking a position, the trader determines how long they would like to be in the trade. This may be based on personal reasons, such as time constraints or it may be more technical and likely should be.

Technically timed exits may include exiting at the end of the U. It may also use averages; for instance if a trader determines the average intra-day trend lasts four hours in a particular currency pair before reversing, the trader can use this as a time constraint on the position, exiting once four hours from the start of the trend has elapsed.

Indicators such as Fibonacci time zones may be used, or if a news event is upcoming, the trader may wish to exit prior to the news announcement time. We compare the results of two forex trades based on MACD histogram divergences. Refer to Trading Divergences In Forex. Strategy-Specific Exits Finely tuned strategies require finely tuned exits. These may include a combination of all the methods mentioned prior, or may include specific exits for differing scenarios. Take for instance a strategy revolving around trading a major news announcement such as the Nonfarm Payroll NFP Report.

In USD related pairs this announcement can cause large swings. A trader may wish to capitalize on a predicted currency pair movement once the report has been published. Following, the trader has no more need to actively hold the original pair as it was simply a play on the outcome of the report. In the case of the NFP report or any volatility causing news event a trader may have a series of exits planned.

One is the initial stop-loss - this is the maximum loss the trader is willing to take. The second is a trailing stop — as the rate moves in the trader's direction so does the stop.

FX Exit Strategies: Keeping Your Profits

A third exit strategy may be to lock in profits if the situation develops where the trend could quickly reverse. Therefore, as a third exit a trader uses a candlestick pattern for example — if an engulfing or other strong reversal pattern occurs the trade is exited.

Forex Trading Strategies - Forex Articles | DailyForex

In Figure 5 the NFP report was released at 8: On the breakout a long trade is entered, with a stop-loss placed just below former support at As the trade progresses a red bar occurs, but the rates moves higher once again.

The stop is trailed up to this new support point. Several bars later a bearish engulfing pattern occurs circled and the trader takes the profits on that reversal signal. The Bottom Line The combination of exit methods is virtually endless. While one trader may use only trailing stops, others may use a combination of a time, indicator, chart or candlestick patterns to aid in exiting.

The ultimate goal is to keep profits and minimize risk. This can be done by using stop-loss orders, trailing stops, exiting when the entry criteria no longer exists, timed exits or strategy specific exits. By using these methods and possibly combining them, it may be possible to retain more profits and reduce losses.

Make more educated trading decisions by identifying major turning points.

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Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. Keeping Your Profits By Cory Mitchell Share. Introduction To The Forex Market Stop-Loss A stop-loss order is a very common way to control risk and exit a position if it reaches a point where we are unwilling to absorb further losses.

A soft stop provides a trader with added flexibility, allowing him to react to ongoing changes in the market. By watching for false breakouts, reversals and using multiple exits, a forex trader can capture a large portion of the daily average movement. An effective exit strategy builds confidence, trade management skills and profitability.

Setting appropriate exit points should help you avoid taking premature profits or running losses. Combine trailing stops with stop-loss orders to reduce risk and protect portfolio value. Trying to pick the absolute top and bottom points can lead to excessive losses.

This strategy allows you to hedge your risk. Three types of profit protection stops lock in profits at different stages in the progression of a successful trade. Five trading strategy steps for building your own day trading strategies, managing risk, finding entry and exit points and testing for profitability. A trailing stop is similar. Learn how to place a stop-loss order and how traders use stop orders to either limit potential losses or to protect part Learn about the various methods a trader can use to minimize risk of loss or protect a portion of profits in an existing Read about some theories on stop-loss placement and how traders use stop-loss orders to hedge against losses and capture Understand the purpose and uses of a stop-loss order as a risk management tool for trading and also the risk associated with Learn about trailing stop orders, how to use them and when they should be used through an extensive example.

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