Forex Trading: 3 Tips To Stop Exiting Trades Early
When real money is on the line, new Forex traders find it very hard to manage the trader properly. Before the trade, they follow the trading system rules for entry and are calm and rational. But after the trade is placed, and real money is at risk, they let emotion take over.
This results in managing the trade based on emotions of fear and greed, instead of the rules of the trading system itself. Let’s say you place a trade and have the good fortune to see it go into profit immediately. Even though you are not at the designated take profit level, you exit the trade early to keep from losing the money you already see in your account. Or, you get into a trade and it goes against you so you exit the trade before the stop is hit. In a lot of cases, price continues to your original price target, or turns around and goes profitable, which means you lost money by exiting early.
In either case, you were not following your trading system, which is not a good thing. I’m going to go over 3 ways you can keep from letting emotion take over which makes you exit trades early.
In the first case, let’s say you are using a system that sets a stop loss and has one price target. The very best thing to do is set the stop and price target directly in your trading platform. Now the important part is to walk away from the computer. Once the trade is set you should be comfortable with the risk involved and willing to let the trade play out. Watching the chart at this point is of no value. Stop suffering over every tick of the chart and do something else.
In the second scenario, you use a system where you place the initial stop loss, but the target is open and only triggered by a signal in the opposite direction. In this case, you just can’t walk away from the computer because you need to watch the chart to know when to exit. Therefore, I would click on the Terminal Window to make it disappear so I can only see what is happening on the chart. Seeing the number of pips or profit and loss of the trade is only going to be distracting and tempt you to close the trade early. By getting rid of the Terminal Window, you can base your exit on only what you see on the chart like the system demands.
In the third scenario, you place your trade and set your stop. You ignored the previous two suggestions and are sitting there looking at the trade and get the feeling you want to exit early. Instead of closing the trade, why not move your stop loss and lock in profits? Once you move the trade to a breakeven situation, or lock in profits, you’ll be less likely to want to exit the trade all together.
One of the best ways to limit the temptation of closing trades early is to limit your “chart time” by trading on the higher times frames. For example, by trading on the Daily time frame, you can limit the time you make decisions to only 5 minutes a day. This way you will not be constantly tempted to either take profit early or exit the trade with a loss before your stop is hit.
Edward Lomax is part of the Forex Investing Live Team, dedicated to helping people tap into the true wealth creating opportunity the Forex Market provides. Take the FREE course, Forex Investing Battle Plan and learn how to use the secrets of the established wealthy to ensure your success. ForexInvestingLive.com