One of the beautiful things about Forex is that you can get in on trends that just seem to go on and on.
But what’s the good in a having a trend if you can’t stick to it?
Cutting profits short is one of the cardinal sins would-be Forex traders engage in (another being letting losses run). Here are a few quick pointer to help you stay in your winning trades longer and occasionally capture a really big one.
Have a clear objective for the trade
Perhaps the biggest Forex faux pas that traders make is they fail to have clear objectives for what they want to achieve from the markets.
If you’re not crystal on what you want to get out of the trade then you are going to have difficulty getting past the emotions that interfere with your psyche when you find yourself in a winner. The fear of your winning trade evaporating before your eyes will cause you to quickly exit your position, only to see the market take off as you thought it would.
To avoid this un-wanted situation, set a very clear objective for the trade before you enter it – and then make your decisions throughout the trade with the objective in mind.
Have a variety of exit rules
Ever heard the expression “if you only have a hammer everything looks like a nail”?
It applies to trading too. If you only have one exit rule then every trade is going to look the same, no matter if completely different things happen after you enter.
If you want to stay in your trades and let them run then you need to know what to do depending on what happens in-front of you.
It’s really about confidence. If you know the different things the currency pair you are trading might do, and you know what to do when it does them, then you will have confidence in your abilities to manage the trade effectively. This means you won’t be tempted to rashly close your trade out of fear, instead you will be a nimble trader in the moment with the market.
Have a re-entry strategy
A re-entry strategy for when you have exited out of your position is critical.
Sometimes the market tells you to get out of your trade, and then re-bounds in the direction of your trade straight away.
If you have been trading for some time I bet that has happened to you.
Again, it’s about confidence. By having a way to re-enter into your position after you have been stopped out, you are not going to get trigger happy and close your position out of fear. You will close it at the right time, and calmly re-enter if that is what you are supposed to do.
This point may seem a little counter intuitive, but trust me it will help.
Stop watching your trades
A sure way to cut your profits short is to stare incessantly at your charts. We have all done it.
Try setting alerts on your trades, or checking them at a set time. If you are still developing the discipline of a professional trader then you don’t want to be obsessing over the computer screen.
Of course, also place your stops in case something big happens while you are not watching it.
Next steps
Make sure you plan what you want out of your next trade by writing down your objective.
When you get into the trade develop a set of exit and re-entry rules that take into consideration how the market moves so you can protect your profits whilst letting them run (More in the Advanced Course).
Finally set your alerts, your stops and avoid watching the trade unless it’s the appointed time.
About the Author
Sam Eder is a currency trader and author of the Definitive Guide to Developing a Winning Forex Trading System and the Advanced Forex Course for Smart Traders. He is a key team member at premium FX services provider www.fxww.com and part owner of Forex Signal Provider www.fxrenew.com (You can get a free trial). If you like Sam’s writing you can subscribe to his newsletter for free: https://fxrenew.com/newsletter-sign-up.