Entering the trade is always mentioned in different reviews and online forums, leaving behind another important factor when you trade forex – the exit point. But exit points and the strategies it involves are also an essential part of trading.
In fact, they are very crucial and need separate, thorough discussion. Trade exits require so much time that it won’t be a good idea to include it to other strategy reviews.
When creating a trading plan, you don’t just need to precisely create an entry strategy but also an exit plan too.
They are an integral part of your plan and both of them are as important as the other.
There are five effective ways to exit your Forex trades and they are divided into two approaches – the Passive Exit Approach and the Active Exit Approach.
Passive Exit Strategies
If you are into a setting and forgetting, the strategies which will be tackled below should entice you.
Strategy #1: Hit and Exit of the Initial Stop-Loss
This initial stop loss is a form of order which is placed to minimize the risk involved when entering the market. It is very important to have a stop-loss order placed on each of your positions, if you don’t have, then place one.
In this strategy, the stop-loss you placed was consumed, which means that you suffer a financial loss.
Though this is a tragic incident, you should still be happy. This is because you followed your trading rules and didn’t let your emotions cloud your decisions.
Strategy #2: Hit and Exit of the Target Price
If you have a target price in mind, you may utilize a limit order that will bank your profits to safety.
In case you refuse to let those profits run, it will be alright not to utilize a target limit order.
Moreover, don’t simply let your profits run. Create a plan to run it. With this, a trailing stop-loss should offer great help.
Strategy #3: Hit and Exit When Time Stops
Without a doubt, time spells money. Because of this, there are a lot of traders who patronize time stops.
A time stop refers to the exit once a certain period has been exhausted, no matter if it’s profitable or not.
To be tied in a losing position while you miss some of the most profitable chances that easily pass by is not ideal when you trade forex.
If you think that the trade is not going anywhere nice, then don’t hesitate to exit it and find other opportunities to grow.
Active Exit Strategies
To manage your exit positions whilst receiving additional information is just the most appropriate thing to do.
Strategy #4: Hit and Exit on Trailing Stop
There are traders who like to lock in their profits as much as possible. The best tool for this is the trailing stops.
It is a stop order that moves according to your likes to secure your profits. The basic rule of this trailing stop is to move it together with the market price. It should never be away from it.