“The goal of a successful trader is to make the best trades. Money is secondary” – Alexander Elder
Starting to trade is the easy part but the hard part is to take profit from it. Forex take profit strategies are probably the most significant aspects of trading which are ignored by a lot of traders. Without these proper strategies, a trader could end up losing more than he/she has gained.
A take profit strategy is simply a profit target which a trader sets after which he/she exits the market. Given the unpredictable moves of the market, a take profit target acts as the most crucial point in determining the loss.
Why Take Profit Strategies Are Crucial?
They help determine a certain point when the trader should exit the market.
They protect the profits of a trader and limit the losses.
They help eliminate emotional stress by implementing a specific profit target.
They help determine the time frames in which the trader is going to trade.
The following take profit strategies can be useful to create a successful trading career:
1. Trailing Stops – A trailing stop is an order to buy or sell a stock in case it goes in an unexpected direction. They combine both aspects of risk and trade management. Trailing stops lock profit of a stock at a particular position in order to prevent damage if it goes adverse. It fixes a specific dollar amount or percentage of the stock’s current price thereby limiting the loss of the trader.
2. Stop-Loss – One of the other Forex take profit strategies is a stop-loss order. It is an order to sell a stock when it reaches a certain price. It simply limits the loss of a trader on a certain stock by sealing it before it hits a critical level.
The advantage of stop-loss order is that a trader doesn’t have to monitor the market every now and then. It can be useful for people with full-time job or those who have classes to attend or even when they are on a vacation.
3. Fixed Exit Points – A trader should always determine a certain time frame for which he/she is going to trade for before exiting the market. It is that take profit Forex strategy where people usually set time frames. These time frames depend on their personal life or upon the stock market sessions. Sometimes, news event, a natural disaster, a catastrophe, or political events can also determine these time frames.
4. Using Price Alerts – Price alerts are one of the Forex take profit strategies which inform the trader if a price of a stock crosses a certain level. Setting price alerts reduces the time one spends on charts and can help one create a sturdy risk management strategy. Price alerts also create contingencies and help the trader determine how he will exit a trade and take profit.
Now that you have an idea about Forex take profit strategies, you can apply these in your trades and maximize your profits while limiting your losses.
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.