There are a lot of forex traders who allow their winning trades turn into losing trades. This is the worst thing you can do on the forex market. When you trade forex you are looking to make a profit. This means that a profit turning into a loss goes against the goals you have. It is important that you know the ways you can ensure your trade keeps the profit.
Using Trailing Stops When Trading Forex
One of the best ways to lock in a forex profit is through the use of trailing stops. These stops require some work to perfect but they help in the long run. The key to success with these stops is setting up a near-term target. To work the stop with this target you could place the near-term target at 10 pips. As soon as you are 10 pips in profit you move your stop to breakeven. Should the market swing and take out your stop you would have broken even on the trade making no profits or losses. However, if the trend continues you should boost your stop to breakeven with ever 5 pip movement. By doing this you are slowly cashing in on the trade. There are a number of other trailing stop techniques that you could use to optimise your performance.
Keeping Tabs On Your Capital
The fast pace of the forex market is one of the reasons why a winning trade can turn into a losing one very quickly. To protect your profits you sometimes have to close a trade even if it has only made 20 pips in profit. A lot of traders see this as ridiculous you should consider the fact that you may have 10 trades closing at 20 pips each. This makes a profit of 200 pips which is not that bad. A lot of new traders see this type of trading as penny pinching, but the main point to trading is to minimise your losses and make a profit which is what you will be doing.
The capital you have put into your account should be money you are willing to lose, but it should not be money that you are going to lose. You need to protect it and increase the balance at all times and if taking small profits is the way to do this then that is a good strategy. There are two other ways that you can limit the losses you face.
Trading With Different Lots
Another method of locking in profits is to trade more than one lot. By trading more than one lot you allow for two or more separate profit targets. You can place the first target at a very conservative level while the second target is placed further away. On the first lot, when the target is reached you can move the stop to breakeven which stops the winning trade from turning into a losing one. The same should be done for the second lot.
The target you set should be based on the risk management plan you have as well as your trading strategy and style. Long term traders often have first targets set to 50 or 100 pips while short term traders look at 15 pips. Managing each trade is more art than science and does require some practice.
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