The Art Of Taking Profits In Forex Trading
As the famous trader Brian Charles once said, it was never a good trade until profits were made and secured. Every trader must develop the art of taking profits in the market when it is the right time to do so. In a layman’s language taking profit is closing running trades by execution or pending orders, there is also a way of partially closing a trade thus cutting and reducing lot size by so doing partial profits get secured.
When can you use a take profit order
When the market reaches a support or resistance zone
Trades usually respect support and resistance lines, these critical zones determines the future movements in some instances these zones can be reversal zones that traders must always be on watch of, there are weak zones and strong stones where markets always bounces, it is a good strategy to take profits when your trade reaches a major resistance zone.
Change of the general or main Trend
When a trend changes and you notice a significant move against your trade its the best time to take profit, using moving averages for your exits has the advantage of simplicity. And, if you like exits that don’t require a lot of your time, the moving average exit ranks up there as one of the best, when a trend changes it is always shown on the moving averages.
Double top and bottom divergence
There are two types of divergence, bearish and bullish that happens in the market when the game is suppose to change completely, indicators like the RSI always shows a signal when divergence occurs and when it does it is the best time to run away, make sure you will secure all your profits and close running trades.
Market movement Trailing stops
When you are trading instruments that are highly volatile this is the best way of taking your profits, these instruments have no good price action meaning you can quickly lose all the profits that you thought you had amassed. When you trade once the trade is in profit and the market is moving you have to trail the profit using your stop loss, this means the profit that you have secured is yours even if the market moves backwards and hit your stops.
Time based profit taking strategy
Good trades usually start to work in your favor quickly, conversely, some trades will hover and do nothing for extended periods. For an intraday trader, your time-based exit could be as little as 10 minutes, whereas an end of day trader could allow five days of sideways movement before exiting. You need to work your time-based exit based off your trading timeframe.
Fundamental profit taking
When you trade fundamentals you must be cautious in yr executions, all it means is things happen so fast and they happen with time, when a major news item hits the financial markets that is a shock to the economy, you may be best off exiting your position. There are plenty of fundamental news events which can be significant but politics always take the stand together with global economics.