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5 Exit Trading Strategies to Limit Your Risks

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5 Exit Trading Strategies to Limit Your Risks 1

Mostly, traders think about the trading strategies to initiate their trade, but they don’t have an exit strategy. However, an exit planis as important as entering the trade and can save you from losing or wasting your time. So, it’s important to think when and at what point you will stop your forex trading.

The following are some exit trading strategies that can help you in the forex market.

1.     Initial Stop-Loss Hit and Exit

You may know that initial stop loss is an order you use in the forex market to lower your risk when entering the market. In this strategy, you face a loss because the market hits your initial stop loss.

These results are not good for your trade, but at least you can limit your loss with the help of the trading rules. Another important aspect of placing an initial stop loss is the volatility of the forex market. So, it’s important to set your stop loss when you enter the market.

2.     Target Price Hit and Exit

If you have a target price in mind, limit your order to bank your profits. In case a trader wants to increase their profits, they can avoid placing a working target limit order. However, it’s better to have an exit plan for achieving profits. When trading using a broker, a target price may be easier to control and manage.

It’s not a good idea to just let your profits run without any specific plan. You can use a trailing stop loss in this regard. Well, you might feel great when the market hits your target, but some traders don’t get excited about this thought. Wondering why?

When their target gets hit, they think they should have aimed at more targets.

3.     Trailing Stop Hit and Exit

For traders who want to lock in profit, trailing stops are a wonderful strategy. These are stops orders that move in such a way so that it can secure your profits. The basic rule of this strategy is: you need to move trail stops towards the market trading price. Keep in mind that you can’t put it away from it.

There are many ways to place trailing stops, but the rule willremain the same. Make sure to balance between two things:

  • Suffocating the trade to premature death
  • Locking in profits

You can place stops losses near to volatility stops, or you can adjust them to price action.

4.     Time Stop Hit and Exit

Some traders take the quote, “Time is money” too seriously. They make a decision according to the time. This strategy revolves around the practice of making an exit when a certain period has passed, no matter if you get profit or not.

Making your capital reliant on a certain period can take away great opportunities from you. Of course, this is not an ideal scenario. Suppose your trade is going anywhere in your required period; just pass and exit. Try to find other opportunities.

Time stops are great for some categories of traders like:

  • A day trader has a time stop, which ends at the closing of each session.
  • Due to the time decay options, options traders also use time stops.

Moreover, the following are two common trading strategies that involve time stops.

  • QuickTrade using Linear Regression Channel
  • Opening Range Scalp Trade

5.     Situation Changes, Exit At Market

A trader starts each trade because of some particular reason or premises. So, if your reason for initiating trade ends or is not applicable now, you should exit a trade.

For example, you initiate a trade following the Holy Grail Trading Setup, which helps you identify strong trends. And then suddenly you observe that the prices have been decreasing for a long period. It is certain that the strong trend you are looking for is not present. So, once you realize it, quickly exit from the forex trading.

This strategy is best for the pure fundamental traders, as they always have a reason to invest in the market. These traders don’t aim to exit at any specific price, but they should know the fundamental developments that indicate them to exit from the trade.

You also need to understand that this exit strategy is not logical, but it is one of the most subjective approaches. A trader shouldbe aware of their trading edge to use this strategy.

Mostly, traders are sofocused on the P/L movements to get their profits that they forget to look at other things.

Bottom line

Forex trading is challenging and not a thing for every person. This is because most traders only look at certain aspects, although they should consider every rule of the forex market. Some traders also forget to create an exit strategy to end their trade. The next time you make a trade, make sure you have a proper exit strategy in place.

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