Exit strategies for forex trading

It is quite simple to get on how best to enter the forex market, but in most cases, people tend not to give enough attention to how to exit a trade. There are stop loss orders and stuff, so it is easy to see that traders are more concerned with how to enter than how to exit; which of course is understandable. But, knowing some cool exit strategies can also help a long way in trades to avoid risks and losses; so it is important. Also know that a good forex trading strategy is one that contains entry, risk management, and exit plans.

RECOMMENDED BASIC STRATEGIES ON EXITING A FOREX TRADE

There are many exit strategies out there owing to the vast and dynamic nature of the market. This makes it difficult for traders to pick one and get on with it. Here are some recommended ones that can get any trader on the right path

1.    STOP-LIMIT USING SUPPORT AND RESISTANCE:

Support is a record lowest value in a specific period of time trading a particular commodity; while resistance is a record highest value of a commodity in a specific period of time. This exit strategy demands that the trader sets stop loss level above the previous and obvious swing high, which can act as a future resistance level. This is good because a pair that can rise higher than the last resistance level is not one that you should be selling. The same goes for the support level; the trader is expected to set a stop loss level at the same point as the last obvious swing low. If the commodity is falling lower, then you should not be buying.

2.    MOVING AVERAGE TRAILING STOP:

The basic function of the moving average (amongst others) is to filter the direction a currency pair has trended. The key here is to look for buying opportunities at the point where the price of the commodity is above a moving average. In the same manner, you look for selling opportunity when the price is below a moving average. In reading an MA, the trend is said to be shifting when the MA is crossed from one side to another. Trend traders also use this to note when to close out a position seeing that the trend has changed sides.

3.    100 PERIOD MOVING AVERAGE STOP LOSS:

Among the recommended basic strategy for exiting a forex trade is the stop loss based on the 100 period moving averages. Here, the key is to watch the EMA. New candle sticks are created every 15 minutes and the EMA moves with regards to this as the trade develops. After this time, the stop loss is updated to match 100 EMA.

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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