Most traders are only concerned about when to enter their position and often neglect the need to know when to exit their position which is also known as their forex exit strategy. In fact, a trading plan is only completed when you have a well defined exit strategy.
The reason why you need a systematic exit strategy is to allow you to maximize your profit and minimize your loss. This is also precisely why there are so many traders who are struggling to stay profitable today.
Therefore in this post, I will be sharing with you several tips on where to take your profit
1) Support and Resistance: Before you take any trade, you will have done some analysis for the time frames you are using. During the analysis, you will usually identify several important support and resistance levels like Fibonacci, Pivot Points or some other major swings.
You can then place your target profit near a recent support or resistance level. For example, I take a short trade below the pivot S1 level. I will usually place my target profit above the S2 level.
2) Volatility of Market: Another way to place your target profit is from the volatility of the market. If you are trading during the London or New York session where the market is very volatile, you can set your exit further away. If you are trading in a quiet market where the volatility of the market is pretty low, you should then set your exit slightly nearer.
3) Projected Price: There are some trades where you can do a price projection to see how far the price might go. Example, you can do a price projection for a triangle breakout and therefore you can then decide on your exit profit based on the projection.
Other patterns you can do a price projection will be double top/bottom, head and shoulder and trend line break.
Determine your forex exit strategy can be a matter of profit or loss. Therefore you should definitely spend some time to plan your exit as a good entry combined with a poor exit might still lead to losses.
If you are interested to find out where to place your stop loss for your trade, you can read this post that I have written sometime ago.
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