FOREX: Exiting positions at a right time

[abdulla1]

The presented article covers one of the most important (in author's opinion) aspects of trading in general and Forex trading in particular — managing of orders and positions. This includes choosing entry points, making decisions about exit points, stop-loss and take-profit of the trader. I hope this article will help new traders, who just began to work with Forex, and also to experienced traders who trade regularly and regularly make or lose their money to the market.

 

When I started to trade Forex and made my first big losses and profits I began to notice when very important thing about the whole trading process. While the right time to enter a position was rarely a problem for myself (nearly 80% of all my open positions had gone into the "green" profit zone), the problem was hidden in the determining the right exit point for that position. Not only was it important to cut my risk on the potential losses with stop-loss orders, but to limit my greediness and take profit when I can take it and make it as high as I can. There are many known guidelines and ways to enter a right position at a right time — like major economic news releases, global world events, technical indicators combinations, etc. But while the entering into a position is optional and trade can decide to miss as many good/bad entry point moments as they wish, this is untrue if we talk about exiting a position. Margin trading makes it impossible to wait too long with an open position. More than that, every open position in a certain way limits trader's ability to trade.

 

Choosing the good exit points for positions could be an easy task if only the Forex market wasn't so chaotic and volatile. In my opinion (backed by my trading experience) exit orders for every position should be toggled constantly with time and as the new market data (technical and fundamental) appear.

 

Let's say, you took a short position on EUR/USD at 1.2563, at the time you are taking this position the support/resistance level is 1.2500/1.2620. You set your stop-loss order to 1.2625 and your take-profit order to 1.2505. So now, this position can be considered as an intraday or 2-3 days term position. This means that you must close it before it's "term" is over, or it will become a very unpredictable position (because market will differ greatly from what it was at the time you have entered this position). After the position is taken and initial exit orders are set, you need to follow the market events and technical indicators to adjust your exit orders. The most important rule is to tighten the loss/profit limit as time goes by. Usually if I take a middle term position (2-4 days) I try to lower the stop and target order by 10-25 pips every day. I also monitor global events, trying to lower my stop-losses when very important news can hurt my position. If the profit is already quite high, I try to move my stop-loss the entry point, making a sure-win position. The main idea here is to find an equilibrium point between greed and caution. But as your position gets older the profit should be more limited and losses cut. Also, trader should always remember that if the market began to act unexpectedly, they need to be even more cautious with exit order, even if the position is still showing profits.

 

Every trader has their own trading strategy and habits. I hope this article will make its readers think about such an important aspect of trading as the exit orders and this will only improve their trading results.

 

by Andrey Moraru

[shoaybkhan]

in my opinion whenever your trade turns into an entry in the other direction or enters a range, but not every range warrants an exit unless it breaks in the opposite direction of your original trade.

[euro]

You can monitor and if you feel like its heading downward you can then exit if you're scalping. You can see and you should react quickly to it cause once it turns downward it will stay down for like another half an hour so you should take profit while you can and you can still make some pips and don't let it slide all the way down. 

[Bagus]

Here I think traders should have the restrictions in trade due to restrictions in the trade however it is a mandatory part of doing well in it to restrict and limit the loss of profits that can get in this trade

You can monitor and if you feel like its heading downward you can then exit if you're scalping. You can see and you should react quickly to it cause once it turns downward it will stay down for like another half an hour so you should take profit while you can and you can still make some pips and don't let it slide all the way down. 

[surya77]

if you have do anlysis and predict the rprice can be move in one point/level may you can use pending order, we know pending order is very helpfull for you.

[Decub]

Forex is all about timing. Exiting at the right time gives you a good edge to take profit. Making a very successful trade relies on your timing and your ability to exit at the right time. It is that which the trader learns as he trades and tries to understand when the time is best for him to do so.

[myregister]

Entering and exiting the market at the right time is a good idea but how to do it which become the biggest problem. Well, for me it needs more practice, it isn't just as easy as you all might said. Something like experience only can be done by action as far as i know, and i prove it in my career as foreign exchange trader.

[pepy]

It is all about timing and this is right if you enter the market earlier you could make profit bigger right now especially when the market is moving just like what you have been predicted before. Also exit at the right time could avoid more losses or even preserve our profit because of our false prediction.

[myregister]

False prediction means that you make a mistake when you trade, so exiting at the right time is not happening. To be honest exiting the right time is what i want and i am sure many traders who experiencing loss want to do that, but the question is how? Can you answer that?

[Vaabum]

This is really important, but very difficult. Unfortunately, sometimes excitement can take its toll.