Forex exit techniques

Many


instructional articles on forex trading debate when to trade currency


exchange, which currency pairs to choose and how much to trade, but few debate when to close


a trade. Closing a trade at the right point will both


maximise your profits and decrease your


risk.

Following are some


secrets for closing your trades :







Number 1 Currency


exchange closing strategy


– stop losses

A stop loss is when


you set an automated closing level on your currency


exchange trade in case the market moves against you,


and can be a brilliant way of handling your


risk if you are trading part time.

Let's imagine you went short on the EUR / USD at 1.4988 with a stop loss at 30


pips – this implies your stop is set at 1.5018, so if the


euro rises to that level against the US dollar, your trade


will be automatically closed, cutting your losses.

An advantage of


setting a stop loss is that you know how much


money you are risking as soon as you open a trade. When choosing the level


of your stop loss, be absolutely sure to leave enough room for market


fluctuations, as you would hate for your trade to close before the


market turned in your favor.

Number 2 Currency


exchange closing strategy


– trailing stops

Like stop-losses, a


trailing stop is also when you set an automated closing


level on your fx trade. But a trailing stop


automatically follows the market when it moves in your


favor.

If we continue with the previous example, you sold the EUR / USD at


1.4988 in the expectation that the price would go down and


you would make a profit on the difference in price. Instead of having a stop loss at 30 pips, you could set a


trailing stop at 30 pips. This would make your opening stop 1.5018,


and if the euro sank to 1.4856, your stop would drop to 1.4886. By


this stage, your stop is now below the opening cost of the trade,


implying even if the


cost of the euro rose and caused this stop, you


would still finish the trade with a decent profit.

Trailing stops allow


you to manage risk while enjoying unlimited profits.







Number 3 Currency


exchange closing


strategy – profit targets

You can


choose to exit a currency exchange


position when you reach a certain profit target. One of the advantages of this is that you can claim your profits as


fast as they are hit, instead of risking


missing a price fluctuation because your internet connection is slow.




The other advantage


of setting profit targets is that they can be set


automatically, taking the emotion out of trading.


This eliminates the chance of keeping a position


open to see how much more money you can make, and then


having the market turn.







Number 4 Forex exit technique


– break even targets

Like profit targets,


break even targets are targets to stop you from making a loss on your


original investment. This is typically


achieved using trailing stops, where a stop is moved to your entry price, or


slightly outside your entry price.

Number 5 Forex exit


technique – timed exits

A timed exit is


selecting when you would like a trade to shut


at the time of opening a position. This may be timed with


private restrictions ,eg


work or private commitments, or it might be timed with


industrial and political stories ,eg a budget or rate of interest


statement.

You may also


time your forex trades to shut


at the end of the US or European trading sessions.







Technique


specific exits

The exits


you opt to implement will rely upon


your system they could involve one or two of the


previously mentioned techniques, or


some private targets. This suggests that the


mixture of exit techniques is infinite,


so find a technique that will help you


reduce risk and save your profits, monitor its success, and


tweak it as you become a more seasoned trader.     










Remember that CFDs and forex are geared products and may result in losses that surpass your initial deposit. CFD trading might not be suitable for everyone, so please make sure that you understand completely the risks involved.