Simple Exit Strategies in the Forex Market
If you are talking about trading, surely the most frequent topic of conversation is what is a good pair to take a position (in the market), but they rarely talk about how or when to close a position or exit the market.
Closing the position (exit) of a transaction is arguably more important than when taking the position (entry), because it is position closing that determines whether you are in profit or loss. Learn how to close a position, you can potentially earn greater profits. There are some useful methods for closing positions or exit strategies in the forex market that are easy to implement and implement into your trading plan.
The first is to place a stop-loss order. This is a very common way to control risk and close a position if it reaches a level where we do not want to lose more. If a trader buys EUR / USD at 1.3000 and puts a stop-loss at 1.2950 means trader is willing to risk 50 pips despite expecting a potential profit before stop loss is reached. Stop-loss is set at the time of trade.
The second is to use Trailing Stops or stop-loss moves. Stop will move closer to the order points as the pair moves in the direction that the trader wants. In other words, the trailing stop is dynamic and will change over time. A trader can also do this as a new support and resistance formed if the pair moves in the direction desired by the trader.
A trailing stop serves to reduce risk if the currency initially moves in the direction the trader wants but then fails to follow through.
The combination of exit strategies (closing positions) is almost endless. If one trader only uses trailing stop, another trader may use a combination of time, indicator, chart or candlestick pattern to help close the position. The ultimate goal is to keep profits and minimize risks. The two mentioned above are the simplest. By using this method and perhaps combining it, you may be able to better maintain your profits and reduce your losses.