A trading entry system, as good as it might be, is worthless without a good exit strategy.
When trading currencies, an exit strategy is fundamental. Numerous traders invest endless hours in the development of a winning Forex system. They employ a firm stop loss procedure for the purpose of minimizing losses but they overlook a Forex exit strategy that will maximize their profits.
I find this to be an extremely important subject that is neglected by many traders, so I decided to address it. In this article I will describe a couple of different ways that I employ time and again.
Please note that the exact number of pips will vary from pair to pair and will also depend on the time frame that you use to make your entries. You can use it on any pair that you’d like but consider the volatility of the pair that you are trading before setting the actual figures.
The following is my preferred exiting method and I personally use it quite often. For our example, I will explain how I use it while trading the EUR/USD or the GBP/USD pairs using the 4 hours chart for entries.
Once I am in a position and I decide to employ this strategy I always close half of my position once I am in profit of 50 pips. At this point, I also move the stop loss of the remaining half to break even. Simple isn’t it?
By employing this simple strategic move I secure a profit from the majority of the trades that I enter and get myself into a risk free trade for the second half of the position very early on. At this point, even if the trade does not go as expected, I am already in profit from the first half of the position and I cannot lose on the second half.
When do I exit the second half?
Naturally, this will depend on your entry and overall strategy. Here are a couple of variations that I use and you can also use:
1. Get out with your second half at twice the amount of your original risk. Remember where you placed your original stop loss and merely double that number.
2. Divide the remaining half of the position further into two halves.
-Get out of the first remaining half (25% of the original position) after gaining another 75 pips (a total 125 pips profit for this portion).
-Move the stop loss of the second remaining half into 50 pips profit.
-Get out completely after gaining additional 75 pips for a total of 200 pips for the last portion.
Here is another Forex exit strategy that I use. It also uses scaling out of a position in two parts.
-I get out of the first half of the position after I am at a profit that is equal to my risk. At this point I move the stop loss of the second half of the position to break even.
-I get out of the second half of the position after I am at a profit that is equal to three times my original risk.
The point that I want to make is that by getting out with one half of my position early on and by moving my stop loss to break even, it is possible for me to target bigger and more substantial profits while ensuring that I still make some money and protect my capital even if I experience a ‘bad’ trade.
This approach makes a huge difference in my overall performance.
I am an active and profitable Forex trader. I am also a personal Forex coach.
I have been trading the currency markets for over 6 years. The road to being ‘successful’ at what I do was not always an easy one but who said that obstacles are a ‘bad’ thing?
Today, I am doing what I always wanted to do and that is what counts. Besides trading for my-self, I also trade for others; however, what gives me the greatest satisfaction is coaching new traders and sometimes, traders with some experience that want to do better.
Being a trading coach is a responsibility that I gladly accept, watching students ‘get it’ is both a pleasure and a challenge that I enjoy very much.
-Want to get information about my personal Forex coaching [http://ecurrencytradinginfo.com/forex-coaching] program?
-check out my blog [http://ecurrencytradinginfo.com/blog] for more quality articles all dedicated to Forex trading.
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