By: Terry Allen
One of the most heart-breaking experiences of Forex trading is to watch a sizeable profit vanish before your eyes. Even worse, is when your stop is knocked out as well and you incur a loss as a result. This situation is the woe of many Forex traders and can be attributed to poor money management.
One of the most important concepts of Forex Trading is to protect your profits. You are far wiser accepting a smaller profit of just a few pips than to expose yourself to large potential losses. The best Forex traders are first great survivors and then big earners. After all, you are playing with your money and as such you must protect it at all costs. Without it, you can no longer play the game.
However, protecting your profits is not as easy as it sounds. For instance, at what particular profit level do you move your stop to, at least, breakeven. This important action will completely protect your budget for the trades in question. If you move too soon, then you risk being stopped out only then to watch in frustration as the price moves rapidly back in your chosen direction.
If, on the other hand, you wait too long, you could leave yourself vulnerable to a large price correction that could stop out your trade completely. The best way to overcome these problems is to determine the win:loss ratio and expectancy value of your selected Forex trading strategy using either a demo account or risking very small amounts live.
Another method of locking in profits is to trade using two lots at the same time. With the first lot you can set a target based on the next resistance level (if you are going long) or the next support (if short) but they must be readily achievable. You can then set a far more ambitious target level for the second lot. Once the first target level is achieved, you can move the stop allocated to your second lot to breakeven allowing you to trade risk free from that point onwards.
In fact, you would have already banked a sizeable profit. Always remember that achieving Forex success is simply the art of accumulating more winners than losers. Unbelievable, many traders, especially novices, do not even consider viable exit strategies at all. You must realise from the outset that your exit strategy, supported by good money management, is vital to your success.
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FX BONUSES & PROMOTIONS
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Live Rates
| Symbol | Change | High | Low |
|---|
| EUR/USD | 0.001 | 1.3283 | 1.3203 |
|---|---|---|---|
| AUD/USD | 0.0055 | 1.0777 | 1.0684 |
| EUR/GBP | 0.0001 | 0.8401 | 0.8368 |
| EUR/JPY | -0.07 | 103.17 | 102.28 |
| GBP/USD | 0.0009 | 1.5826 | 1.5761 |
| USD/CAD | -0.0014 | 1.0015 | 0.9975 |
| USD/CHF | -0.0009 | 0.9159 | 0.9106 |
| USD/JPY | -0.08 | 77.77 | 77.41 |
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