The most prolific Forex traders would agree to the fact that psychology plays a major role in obtaining success in Forex trading. This means, to be able to succeed in trading, you need to have a clear mindset. The thoughts you have in every trade impacts the overall trading profitability.
There are two parts of trading. But most of the time, traders only focus on the first part but not in the crucial last part. The thing about trading is that you don’t really make money when you open a trade. This is actually the part where you put your money into your trading account at risk. However, the crucial part of trading and yet it is somewhat neglected is the closing of the trade. Whether you make money or not depends on when the trader closes a trade.
You may be able to open a trade at the perfect time but if you cannot close it at the perfect time also, you lose the opportunity to be profitable. Closing your trades is considered your exit strategy. It must be treated as important as when you open a trade.
Your Exit Points Are Crucial
Your exit strategy is a function or part of the entry strategy. For instance, your FX trading strategy indicates that you will take profits from your account at 100 pips from your point of entry. If this is the case, you use your entry strategy as your exit strategy too.
But then, there are a lot of traders who think that their strategy is giving them a signal and therefore, they should just get in as soon as possible. They are always thinking of the entry but not the exit. This market approach can change your perception and can result in catching bad signals.
Check For Some Hidden Risks
Another good way to use your entry strategy as your exit strategy as well is through indicators to give you an entry then you have to wait for a signal that indicates that the market is going in the opposite direction.
But take note, this scenario allows you to wait for two signals in every trade that you do. It will create an impact on your overall risk profile. You will have a risk when you enter a trade and risk when you exit your trades.
Double Up Your Strategies
Another thing that you can try on is using the same strategy to enter or exit a trade. This strategy gives you an unbalanced risk because in every strategy you partake, there is a different risk related to it. Since opening a trade and closing it offers different levels of risks, Therefore, the risks you have considered when you open and when you close it are totally different.
Both the opening and closing of trades are important. You must consider the cost when you enter a trade and the profit you will obtain when you exit the trade. Indeed, you won’t have to deal with risks if you don’t trade. But also, your money won’t grow. Therefore, choose your strategy properly and trade what you can afford to lose.