Doesn't Matter How Effective Your Entry Strategy Might Be, It's Worthless Without A Good Forex Exit Approach.

Whenever trading foreign exchange, an exit strategy is essential. A lot of Forex traders invest countless hours in the development of a profitable currency trading method. They implement a tight stop-loss method for the objective of reducing losses however they ignore a Forex exit method that will capitalize on their profits.

I found this to be a major topic which is disregarded by plenty of investors and traders, so I thought I would write about it in this post . Let me review some exit strategies that I employ continuously.

You need to realize that the exact number of pips will vary from pair to pair and will be influenced by the time frame that you apply to produce entries. You may use it on all pairs; nonetheless look into the volatility of the pair you're trading prior to determining the actual numbers.

I'll describe my favorite Fx exiting approach. I actually employ it quite often. Here, I'll show you how I use it when trading the EUR USD and the GBP USD pairs utilizing the 4 hrs chart for entries.

Every time I'm in a position and I decide to benefit from this approach, I shut 50 percent of my trade when I profit 50 pips. At this stage, I move the stop loss of the remaining Half to break even. Simple is it not?

By using the following easy maneuver I obtain a profit from the greater portion of the positions that I participate in and also get myself right into zero risk trades for the other 50 % quite quickly. Now, even if a trade turns out differently than I desired or anticipated, I actually already pocketed gains from the other portion of the trade and it is no longer possible to lose on the remaining half of the position.

When should I get out of the second 1/2?

Undoubtedly, this relies upon each trader's entry rules and overall Fx trading approach. Let's talk about possible versions that I employ and that you might also take advantage of:

1. Exit the second 1/2 of the position after your earnings are equal to double the amount that you risked. Remember where you placed your stop loss and calculate your risk, now simply multiply this amount by 2.

2. Split the remaining 50% of the trade even further by 2.

- Now that you have two halves (each worth 25% of the whole trade), close one of them right after gaining another 75 pips. This portion has earned 125 pips in total.

- Advance the stop loss that belongs to the portion that is still open right into a cool 50 pip profit.

- Eliminate the position altogether after earning another 75 pips. This should be the last 25% and it earned a total of 200 pips.

The following is a different Forex exit strategy that I employ. It also uses scaling out of a trade in 2 parts.

- Once I earn the same amount as I risked, I close one half of the trade. Here, I also push the stop loss of the left over position straight into my entry price.

- I liquidate my position as soon as my profit reaches three times my initial risk.

The point that I want to make is the fact that by getting out with half of my position early on and by moving my stop-loss to break even, it is possible for me to aim for larger and even more substantial profits while making certain I still earn a little money and protect my funds regardless of whether I encounter a 'bad' trade.

This exit approach creates a massive difference in my all round performance.


Article Source: FxTradingStock.com

About the Author

Learn more about Forex trading. Stop by Ruben Topaz's site where you can find out all about personilized Forex trading strategies and what it can do for you.

by: Ruben Topaz

Total views: 14 Word Count: 629 Date: Mon, 13 Jun 2011

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