Trade Exit - How To Cut Losses And Let Profits Run

Home
>
Currency Trading
>
Trade Exit - How To Cut Losses And Let Profits Run

Trade Exit - How To Cut Losses And Let Profits Run

Cut your losses short and let your profits run. This is the essence of your trade exit rules.

Cutting losses short

A protective stop protects your trading capital, it is your initial trade risk. Before a trade is even entered your should know where your protective stop will be - this is your maximum loss (barring any slippage on the exit). There are many different ways to determine a protective stop on a trade:

Set dollar amount - Say $500 on every trade

Percentage retracement - Say 10% from the entry price

Volatility - A percentage of the average true range of the previous x bars

Moving Averages - the opposite of the moving average entry

Channel breakouts - the opposite of the channel breakout entry

Based on areas of support and resistance stops

Time - If a position is not in profit after a certain length of time then it is exited.

Letting profits run

An effective exit technique is also required to allow a successful trade to make the most profit possible and give back the least amount of it.

Usually a trailing stop is employed to achieve this objective. A trailing stop moves to lock in profits as the trade moves in the traders favour, it should never be moved backwards. There are many different ways to calculate a trailing stop:

Volatility - the stop is calculated as a percentage of the average true range of x periods.

Dollar - A set amount determined before the trade is entered.

channel breakout - exit a long position at the low of the last x bars.

moving average

chart patterns - ie move the trailing stop behind each consolidation as it forms.

Other forms of exit are:

Time Stops - A trade is exited after a certain length of time no mater what. A day trader, for example, will always exit at the market close.

Targets - A limit order is placed to exit a position at a pre-defined profit objective. However this tends to break the rule of letting profits run and usually reduces the profitability of a system by cutting short the best trades.

Tim Wreford runs Online Futures Trading, a website that provides information and resources for traders. Tim also provides a free day trading system, the results of which are updated daily on the site.

In The News:

Movers: Citi, GM, GAP, Dell, Wal-Mart
BusinessWeek - 8 hours ago
Forex Club Try trading Forex today with a free 5000 demo account OR start trading live and get a $100 bonus. Try Currency Trading Learn to Trade FX with a ...

Maktoob Business (press release)
Euro Back in Favor as Stocks Gain
Wall Street Journal - 18 hours ago
The single currency is trading above $1.2600 after it declined to $1.24 Thursday when oil prices retreated under $50 a barrel and US stock markets fell hard ...
Dollar Posts Weekly Gain as Stock Plunge Spurs Haven Demand Bloomberg
Traders Renew Appetite for Risk as Obama Names Treasury Secretary International Business Times
Yen Trades Near Three-Week High on Signs US Recession Deepens Bloomberg
Bloomberg - Bloombergall 346 news articles

Runaway FX turnover growth tamed by crisis
guardian.co.uk, UK - 15 hours ago
London's position as the global hub of currency trading was cemented with figures in April from the Foreign Exchange Joint Standing Committee (JSC) showing ...

Americans’ ’Hypocrisy’ in Auto Rescue Spurs Me-Too Trading Ire
Bloomberg - 8 hours ago
One of the Americans’ biggest gripes involves Japan’s currency, which they claim is kept artificially cheap against the dollar. The Automotive Trade Policy ...

FX OUTLOOK-US dollar to remain bid in holiday week
Reuters - 10 hours ago
US markets will be closed for the Thanksgiving holiday on Thursday, while trading is expected to be light on Wednesday and Friday. ...

RTT News
Australia, NZ Dollars Drop as Stocks Plunge; RBA Intervenes
Bloomberg - Nov 20, 2008
Australia's currency dropped as low as 60.76 US cents, close to the low of 60.1 cents touched Oct. 28, before trading at 61.11 cents as of 12:25 am in ...
New Zealand dollar falls to 3-week low against European currency RTT News
Australian, New Zealand Dollar Decline on Equities, RBA Minutes Bloomberg
Australia, NZ Dollars Slide on Japan Recession, G-20 Inaction Bloomberg
Bloomberg - Bloombergall 41 news articles

Euro Forecast to Decline Further Against US Dollar on Forex ...
Daily FX, NY - Nov 20, 2008
EURUSD – Currency trading crowds have recently bought the Euro against the US Dollar, and we forecast that the sudden shift in sentiment may bring Euro ...

Kuwait Times
Forex Expo promotes currency trading as alternative to bourse
Kuwait Times, Kuwait - Nov 20, 2008
By Dana Khraiche, Staff writer KUWAIT: Currency trading has its ups and downs. Recently, one of Kuwait's largest lenders, Gulf Bank suffered a major crisis ...

AFP
WSJ(11/11) Currency Trading: Bad Crop: Commodity Currencies
Alibaba News Channel, NEW YORK - Nov 11, 2008
When commodity prices fall, it translates into a shock for the trading position of commodity-exporting nations. Suddenly, the price they earn for their ...
Value Plays in Equity Markets Help Support Euro Rally International Business Times
Euro firms against dollar, pound sinks amid credit turmoil AFP
Yen Falls Most in Two Weeks Versus Dollar, Euro as Stocks Rally Bloomberg
RTT News - Reutersall 224 news articles

Currency Trading Markets Remain Highly Correlated to Dow Jones ...
Daily FX, NY - Nov 18, 2008
Currency trading markets continue very highly correlated to broader risky asset classes, as the common theme of financial market deleveraging creates strong ...
Currency Trading Markets Remain Highly Correlated to Dow Jones ... Daily FX
all 6 news articles

currency trading - Google News

Trade Exit - How To Cut Losses And Let Profits Run

Currency Trading Currency Trading