No doubt we all love getting into a trade. The idea of profits on the way is exciting and gives your efforts purpose. Unfortunately the the urge to close a trade can come twice as hard and fast. In most cases the results may leave much to be desired as the aftermath of emotional trading decisions.
There are a few components that fit together to build a solid strategy. No matter what your strategy is, you can use these components as the foundations to solidify your strategy:
1. Risk management
2. Trade plan
3. Entry and exit plan
Getting into a trade requires a few factors to be carefully considered and no exceptions should be made when closing your trade. There are primarily two reasons why I would close off my trade:
1. Take profit was reached in which case I am automatically opted out of the trade
2. Stop loss was hit, either as a loss or in profit if the stop was trailed.
So when is the best time to close a trade? Never!
This chart shows you exactly how I have used the swing low to pull up a level that I am using to manage my trade. In this case 125 pips have been secured because my stop is now moved into the profit zone, a small gap above the red level that I am watching.
The RSI is heavily oversold on this pair so a pullback is likely to happen and the red level will be my line of defense in keeping this trade alive - should the market fall again I will follow the same process with a new support/resistance level when one is formed until the market pulls back and takes my stop out.
Through this process you will be able to maximize your profitability and avoid closing your trades prematurely. You can turn trades with a risk to reward ratio of 1:3 into a closed trade with a ratio of anything up to 1:10. The reason why this matters so much is because you can still make a serious amount of profit even if you experience a low strike rate on winning trades.
The pitfall some traders land in is letting stops run and taking profits too soon. Having a solid plan with principals to follow gives you something to work towards instead of making random decisions that could limit your returns.
Thanks for reading my blog!
You can access a variety of resources that I have developed for traders
1. Forex Bootcamp is a trade room with real-time updates on the market, trades and other useful resources. There is no access fee or other costs involved
2. Chartmaster is my own trading algorithm that I have developed. Better known as a trading robot to most traders - this software can trade for you on your trading account while you do life
3. Markup Buddy is an incredible indicator designed to reveal powerful levels to you to take advantage of. You can request your copy, no strings attached
4. You can register for full access to the training area on this website. It's free!
Share this with a trading buddy if you think it will make a difference. Happy trading!