One of the most disheartening experiences in forex trading is to look at how a winning position quickly becomes a loser quickly before our eyes. Any Forex trader knows that there is nothing worse than looking at how the profits disappear and become lost. This situation is the nightmare of many traders and can only be attributed to poor monetary management .
One of the most important things in Forex trading is to protect your profits. In many cases it is much wiser to accept a small profit of only a few pips than to expose to suffer great losses. The best Forex traders are first big survivors and second big winners. After all, remember that as an operator you are playing with your money so the most logical thing is to protect it at all costs. Otherwise, you probably will not stay in the game for long.
However, protecting your profits is not as simple as it sounds. For example, when you reach a particular profit level, you must move the stop loss and put it at least at breakeven, where you do not win or lose. This very important action will completely protect your trading account and allow you to at least not lose money in case a position is going against you. However the problem with this is that if you move the stop loss too soon you risk the position being closed too quickly just to observe that the prices move directly in the direction of the market that had previously chosen.
If, on the other hand, you wait too long, you could be exposed to a long price correction that could get you out of the trade altogether and cause you greater losses. The best way to overcome these problems is by determining a gain-loss ratio and an expected gain value from your selected Forex strategy using a demo account or by risking a small amount from your actual account.
Another method to protect your gain is to operate using two lots at the same time. With the first batch you can set a target based on the next resistance level (in case the position is long) or the next level of support (if it is short), in any case that target should be attainable. From there, you can set a second, more ambitious target for the second batch. Once the first target is reached by the first batch, you can move the determined stop loss for your second batch to breakeven which will allow you to operate risk free from this point.
In fact, in this at this level you will have already achieved a significant benefit. Always remember that achieving success in Forex is simply the art of making more winning trades than losers. Believe it or not, many operators, especially novices, do not even consider the use of viable exit strategies. It is important that every Forex trader understands, that having a successful exit strategy along with good monetary management, are vital to the success in the difficult world of the Forex market.