The Importance Of Forex Trading Strategy

One of the great differences between beginner and expert Forex traders is that the former determine only how to enter trades without considering too much as having a successful exit from them. On the other hand, more experienced operators pay special attention to their exit strategies and always know how to handle the outputs of their positions even before entering them.

The experts base their exit strategies on several concepts which will be detailed below. For example, in some cases they may close a position after a chosen technical indicator has reached a certain critical configuration, for example a crossover in a stochastic. In these cases they should have a price level objective in which they consider that the price of the currency pair can actually reach before technical and fundamental factors that change the behavior of the market intervene. Other Forex traders prefer to select a period of time within which their target price should be reached and otherwise close their positions.

Many experienced traders recommend that once you enter a trade and set your stop loss and your profit taking prices, you should not change them. These same operators recommend that you do not move your stop since otherwise you will be exposed to increase risk. The practice of waiting for an operation to change direction can be a hugely negative strategy that can put all the money in your account at risk.

However, profit-taking objectives are a different matter, because if they are placed too close to their entry, they reduce their risk-reward ratio. This is definitely not a good long-term strategy. A maxim in the world of Forex and trading in general is to let the profits run. This phrase means that if you detect a clear trend, with the possibility of continuing for a certain time, it is best to enter and simply leave the position accumulating profits for which you only have to adjust the stop loss and take profit each time and being attentive to Any signal indicating a change in trend.

On the other hand, another important trading condition that may occur is that when you are in a position waiting for the market to move in one direction, you suddenly begin to move in the opposite direction. In such circumstances, a recommendation is to reduce the take profit, bringing it closer to the entry price and even recommend moving the stop loss in the same way, you should never go further away waiting for the market to change direction.

In addition, great care must be taken if you are operating under the following conditions: Suppose you put an entry for a short operation because you anticipated that the price will rebound from a resistance level. However, even though the rebound actually occurs as expected, to the point that the entry was activated and is in position, the end of the currency pair continues the upward trend. If this happens, you should immediately close the position in order to minimize your losses.

In order to have the maximum protection, you need to become an expert in reading graphics in such a way that you can detect when some type of pattern is beginning to materialize. That is where you as an operator need to know how to respond in the best way so that you maintain the best ratio risk: reward possible.