By: Adrian Friggieri

A few days ago we started talking about exit strategies to be used in Forex. We shall continue to discuss the large amount of exit options that we can use in order to have some better idea of when to exit the trade with maximum profit. As previously said, we take so much time to think of the perfect entry point and then we completely discard the exit point? Would you enter a building without knowing from where to get out? Would you get into something dangerous without having a clue from where to get out? I am sure not. The same applies to Forex traders. So let’s talk about the next exit option;

Use Fibonacci Retracements (Fibos)

The same underlying principles apply to all the exit strategies we might discuss. Which are; when a trade moves your way some safe pips move immediately the SL to breakeven and have a free ride on the market! Yes this is very important because it is vital to keep in the game rather than chasing constant wins.

How to use fibonacci retracement as an exit strategy? Simple funnily enough. Simply identify the main resistance and support points combined with the main retracement points which are usually drawn out for you by your trading platform. Most if not all trading platforms have integrated fibonacci retracement lines design tool that would simply draw all the important lines for you by simply pointing the two peaks (high and low) and letting the software do the rest for you. fibonacci retracement main numbers are the 23.6%, 38.2%, 50%, 61.8% and 100%.

These key points could well define turning points or support/resistance lines which you should monitor closely when you have open trades. Also do not enter trades without planning carefully around these areas because you need to take a market based decision to which area to trade if the entry zone is around one of these key areas as possible turning points might be on your horizon.

Although is it not exactly known why this happens it is a known fact that stock markets and forex markets reach around this areas all the time. So simply follow the market moves and eyes wide open on those fibonacci retracement lines in order to identify if you should exit a trade because there is possibility that the trade is turning at any one point of these levels.