Finding Precise Entries and Exits
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The views outlined by the author in this blog post are their own and do not reflect the views of AxiTrader. Forex trading is risky and is not suited to everybody. Together forex entry and exit strategy form the decision-making engine of your Forex trading system.
You need to get the correct perspective about where forex entry and exit strategy three components fit into your trading plan. I started this article by talking about the importance of entries and exits and now I am saying they are not to be treated with such reverence.
The reason why this question is important to you is because if you answer it wrongly and spend too much of your focus searching for the Holy Grail forex entry and exit strategy, then you will experience a major time-suck… or worse, you will end up with a half-baked system that loses you not just time but money. The better your entries and exits, the more winners in the draw, and the easier it will be for forex entry and exit strategy Forex trading system to meet your objectives.
Forex entry and exit strategy goal for your entries and exits is to add as many winning tickets into the draw as possible — or to add in tickets that when you do pull them ensure you win the jackpot. When you internalise this concept, you can start to see how entries and exits fit into the bigger picture of your Forex trading system. They lose their mystical appeal. When you construct a house you decide how many rooms it will have, the layout, how many floors and so on.
These decisions are based on your needs objectivesbudget trading capital and what suits your personality psychology. Your choices here will be a reflection of your needs, budget and goals. Before you read on, which Forex trading system would you prefer? The system that made the most profit had the lowest winning rate — and the system that lost money had the greatest win rate.
When you are developing your entry and exit, the one with the most wins is not always the best. Be careful not to fall into this trap. As a side note, it is possible to have a system that has a high win ratio and larger losses than profits. Entries and exits should never exist independent of each other. This would mean you avoid placing the following trade or look for a profit objective further out.
They allow you to focus managing your trade after you enter rather than on interpreting a jumble of indicators to work out the best time to buy. Now you become the hunter or huntress, spear in hand, pursuing a forex entry and exit strategy entry with dogged determination. You are face-to-face with the markets, unwavering while you wait for the perfect moment to strike.
You could then employ a technical analysis technique such as candlestick analysis for the actual entry. Each exit is quite simple on its own.
The complexity comes with the variety of exits that are required to:. Your initial stop defines your risk on the trade. Break-even stops are a powerful psychological tool. Consider moving your stop forex entry and exit strategy break-even after a certain amount of profit or a weak mid-range reversal signal.
A profit target is an order you place in the market to close your position once it hits a certain price. These are useful in sideways markets, but some experts suggest forex entry and exit strategy they work well in trends too.
A profit objective is different to a profit target. A profit objective is a goal for your trade. When you understand your system, you will know how forex entry and exit strategy profit a trade is capable of making. You can then manage the trade is a way that seeks to maximise profits. It is really about letting profits run or altering profit targets based on what the market is doing in front of you. A trailing stop surprise, surprise trails the current market price. There could be a whole article on trailing stops there are so many, suffice to say they can be based on a set price say 50 pips behind the market or they can be based on an indicator such as a moving average.
If you like moving averages, try displaced moving averages. Sometimes the market defies gravity and launches into a rapid move, only to come crashing back to ground. If you are in a trade that forex entry and exit strategy off like this, then you can adjust your trailing stop to avoid giving back your gains.
Perhaps you go to a lower time frame or be prepared to only give back one or two times your risk. Support and resistance are difficult prices for the market to move through. They also form a platform for a further extension of the price. You can exit based on price action. For example, you might see a candlestick reversal pattern that indicates the trend is coming to an end. Depending on your trading time frame, if there is a large daily move of say pips, you could look to sell as the market has most likely overshot.
You can exit a position based on market fundamentals and news. For example, you might close out of your short-term positions prior to a major news announcement, or exit a position on negative news. You may exit after a specific period of time in a trade or on Friday before the market closes for the weekend. Savvy traders often monitor the cross rates to get an indication of forex entry and exit strategy direction of the currency pairs they are trading.
If the price action forex entry and exit strategy the cross rates is signalling weakness, then it might be time to exit your trade. If you follow a particular expert, you may choose to close your position if they suggest the market is about to turn. This powerful approach helps you to maintain your profits if your trade gets close to your profit target, does not touch it, and reverses. By scaling out, you exit portions of your position, based on different criteria.
For example, you might take a small amount off when the market first make some available, some more at a pre-planned target, and finally leave some on a trailing stop to capture the big wins. By having a variety of exit strategies in your toolbox, you can effectively manage your position based on what happens in the market after you forex entry and exit strategy. You can intently watch the market and adapt to its movements in order to generate the best possible result for you trade.
As a trader you can only plan and then be present. Once you execute the trade you are simply experiencing, not creating. Your exit decision should be based on what the market is doing right now, not dependent on a perfect recreation of a historical pattern that conforms to your back-tested indicators. If you enter simply and apply the right exit to the right scenario, then you will have uncovered the second key to Forex system development.
And as always, I encourage you to get out your trading plan or trading journal and integrate this lesson into your Forex trading for maximum effect. Pick one or two next exits from the list you want to add today, and then over forex entry and exit strategy you can come back for more. Thank you for visiting AxiTrader. If you would still like to continue, simply close this window.