Welcome to this 2 lesson of Timing in Forex. When to exit a trade — a crucial skill that complements well-timed entries and protects your capital while maximizing profits to create your Trading Exit Strategies.
Knowing when to exit a trade is just as important as timing your entry. The key to successful trading isn’t just about how much money you make but about minimizing losses and securing profits. This lesson outlines effective forex exit strategies to help you manage your trades intelligently.
Using an example chart, let’s say your entry point is on a balance of a rising trend line. You set your initial target based on your risk — for instance, risking 50 pips. Your first profit target will be 50 pips above the entry price.
From there, identify possible resistance zones to set additional profit targets to know when exit a trade. In this case, there are three targets corresponding to these resistance levels.
You open four positions even though there are three targets — here’s why:
- When the price hits the first target, close one quarter of your position and raise your stop loss to breakeven for the remaining trades. This makes the remaining trade risk-free.
- At the second target, close another quarter of the position and move your stop loss to the first target price.
- When the price reaches the third target, close another quarter and move your stop loss to the second target.
What About the Last Quarter?
Keep the last quarter open. Statistically, traders tend to keep losing positions open longer than winning ones because they close winning positions too early. But since you’ve secured profits on 75% of your position, you can afford this small risk to potentially maximize your gains.
Even if the price reverses to hit your stop, you still walk away with a profit. Whether you use ATR moving averages or manually raise your stop after every 100 pips, your trade remains profitable.
Conclusion or When Exit a Trade
Knowing how to know when to exit a trade effectively transforms good trades into great ones. Use these trading exit strategies to protect capital, lock in profits step-by-step, and leave room for extra gains.
Practice these exit strategies with PROP365 to optimize your trading performance and safeguard your profits.
