Forex Trading Stop Strategy

Forex Trading Stop Strategy

Stop Trading Forex Strategies Many traders find the most difficult thing about successful forex trading is deciding when to close trading. This is known as the exit trading strategy. This is probably the most challenging and frustrating part of trading and this discussion tends to be ignored in most forex education.

Why is stop very difficult?

There are two main reasons why a strategy to stop forex trading is very difficult.The first reason is because many people think this is the same as entering trading, only in reverse. The logic here briefly is that entering well is the same as a good exit from trading. This is not true, because we usually look for different things when entering trading than when at the exit.

For example, say you have entered trading because the candlestick formation that you believe has predictive power. The login process is successful, and the value goes in the direction you want. You then see the same formation happen, but the incoming signal becomes short. Is it right to exit trading now? The right answer depends on your goals, whether you are looking for profits from short-term movements, long-term movements or both. There is no wrong answer here, according to the goals of each trader. This is for the simple reason that you really do not know if the price will back or it will be a little pull back before continuing in the direction you want.

What kind of answers are right depends on your goals. You must answer this question yourself before you know the exit strategy that is right for you. If you think you can win 60% of your trading then your risk to make it back becomes big, so it makes sense if you have to be ready to take advantage quickly. If you prefer statistics that are easier but psychologically more challenging in winning. Only a few of your trades make big profits, so it makes more sense to be very patient before leaving trading. Of course, you can combine both views and take initial partial profits and leave the rest then hoping for a big win.

Fixed rewards

With this method, the distance from the trading entry with stop loss represents 1 unit of risk. Here you set profits based on multiples. For example if you want 2: 1 with a stop loss of 100 pips, then you set a profit target of 200 pips. This strategy is easy and can reduce stress. You can have multiple targets. If you use a proper entry method and the currency trading pair heats up, you can use a fairly high ratio of at least 3: 1 which gives you the opportunity to get better profits. The drawback is that this method can become too rigid because it doesn’t pay attention to how the market conditions after the entry. You might lose your target with only a few pips and finally lose trading.

Time-based exit

This strategy is often ignored. You just have to decide to exit trading while it’s still open after a certain period. The return test shows this method is surprisingly beneficial. This has the advantages and disadvantages of the previous method described above.

Reward for risk and time out combination

You can combine the two methods discussed above by making decisions such as to exit trading at a future point in a certain time if the reward target has been fastest, there is at least a certain minimum.

Trailing stop loss

This method is intended as a real trailing stop loss that is set at a certain proportion or number of pips or uses any method that moves up so that you can finally stop and exit. If you get a very strong step, this method makes you longer in trading and helps to maximize profits. The main disadvantage of this method is that they may not get many benefits, especially if used incorrectly. That’s the strategy to stop forex trading that you can get.