FXTM information and reviews
FXTM
95%
OctaFX information and reviews
OctaFX
94%
XM information and reviews
XM
93%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
91%
HFM information and reviews
HFM
89%

Simple and Effective Exit Trading Strategies


Beginner traders hold a position to the last minute, trying to break even, close it prematurely and have a missed profit, skipping a good exit point. Do you want to minimize such situations? Follow the exit strategy for beginners. We will analyze the basic signals for exiting a position and teach you how to work with the terminal's auxiliary tools.

Stop Loss and Take Profit: How to Work with Limit Orders?

Stop Loss is a type of pending market order, with which you give a command to sell or buy an asset automatically when the price reaches a set point. Simply put, when a trader sets a Stop Loss, they say: "I expect the trade to make a profit, but if something goes wrong, I want to limit the loss. I'm willing to lose N points on the trade. Exchange, sell N assets on my behalf if the price hits the N mark."

Take Profit works in exactly the opposite way. The trader gives a command to close the position if a certain profit is achieved. Ideally, the Take Profit should occur at the moment of the beginning of a corrective movement. In fact, the exit strategy using orders can be called a strategy of a given mathematical expectation.

Please note: Stop Loss should be 2-3 times lower than Take Profit. Thus, one profitable trade will outweigh several losing trades. The trader will remain in the black. If you want to win not by quantity but by the quality of trades, you can set Stop Loss and Take Profit to approximately the same values. Using Stop Loss and Take Profit is very convenient, but it is wrong to just set them and wait until the trade will close with a profit or loss. Think of these tools as a safety net. Only give them up completely when you can't track a position in real-time.

Trailing Stop Loss Exit Strategy

A Trailing Stop is a Stop Loss that moves behind the price at a predetermined distance. For example, at a distance of 100 or 200 pips. It is not fixed as in the previous example. Let's consider its use on simple figures.

Simple and Effective Exit Trading Strategies

Efficient Output

The trader has opened a Buy position when the price of one unit of the asset was 1000 dollars, and has set a 100 pips Trailing Stop Loss from the price (for the sake of convenience, let's assume that 1 point equals 1 dollar). Soon the price of the asset increased to 2000 dollars, and the Stop Loss increased together with it. Now it is not 900 dollars, as at the previous price, but 1900.

Reaching the level of 2000 dollars, the price of the asset began to decrease actively and stopped at the level of 900. The trader's position turned out to be profitable. At 1900 dollars, the Trailing Stop Loss was triggered. If the trader had set a regular Stop Loss, the trade would have been unprofitable.

Exiting a trade with a Trailing Stop is more suitable for automation. Just remember that if you set it separately, the Stop Loss will pull up only after the specified distance has passed in the direction of profit. You can not leave your trade unattended until that moment. You risk losing your entire deposit if the price moves in the wrong direction.

Exiting a Position Gradually: Taking Profits in Small Portions

The method of market exit can be combined with the strategy we discussed above. Use it when you are not sure that the price will keep moving in the right direction.

The strategy is as follows:

Then all that remains is to relax and wait. In terms of game theory, the stepwise exit approach is completely disadvantageous compared to the other strategies described. It reduces the mathematical expectation of profit by half. Why use it then? The key advantage of the strategy is that it relieves the trader of psychological stress. You should not underestimate the pressure factor at the initial stage.

Simple Market Exit Signals: How Do You Know When It's Time to Exit?

We learned how to set the Stop Loss and Take Profit, we have disassembled the concept of Trailing Stop, and we mentioned the stepwise method of closing a position. Now we know how to exit correctly, but the question "When?" remains open.

Here are the key signals indicating the need to close a position:

#source

Share: Tweet this or Share on Facebook


Related

Risk Management In Forex Trading: Main Principles
Risk Management In Forex Trading: Main Principles

As we know, forex trading is a very risky business. In other words, a trader can lose money, if the market rate changes to an unfavorable side. However, the threat of financial losses in trading cannot be totally ruled out...

Dogecoin vs. Shiba Inu: Which one is the Better Investment?
Dogecoin vs. Shiba Inu: Which one is the Better Investment?

Dogecoin and Shiba Inu have captured many crypto headlines over the last few years, as some have become millionaires overnight. However, deciding on buying Shiba Inu vs. Dogecoin...

Top Bitcoin Trading Strategies to Make Money
Top Bitcoin Trading Strategies to Make Money

The phenomenon that is Bitcoin has gripped the mainstream market primarily due to the fact that the digital currency has shown it is a good way for people to make money...

Steps to a successful forex trading strategy
Steps to a successful forex trading strategy

Are you an aspiring trader on the cusp of diving into the world of trading forex but unsure how to go about it? Or are you a seasoned forex trader perhaps who’s become a little too complacent...

Turtle Trading Strategy Explained
Turtle Trading Strategy Explained

Currently, the forex market offers numerous different tools to improve trading. Experts in financial markets develop both simple trading strategies, which will be convenient...

3 Strategies to Boost your Trading Mindset in 2023
3 Strategies to Boost your Trading Mindset in 2023

Getting ready for the new trading year? Check out this article to discover some of the most effective trading strategies to boost your goals!


Editors' Picks

FXCM information and reviews
FXCM
87%
ActivTrades information and reviews
ActivTrades
86%
RoboForex information and reviews
RoboForex
85%
MultiBank Group information and reviews
MultiBank Group
84%
Libertex information and reviews
Libertex
83%
Vantage information and reviews
Vantage
83%

© 2006-2023 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.