How to Time Exit in a Volatile Forex Market

Trading in the forex market requires careful planning and execution. Entering the market is easy; however, exiting it is the tricky part. Greed is probably the biggest enemy of the forex trader. Once the profit starts flowing, all the trader thinks of is increasing the account. What he forgets is that a single downtrend could easily wipe the whole account clean.

Choosing the Best Forex Exit Strategies

Listed below are some of the most effective tricks used by forex market experts to find their exit points:

Trailing Stops: These stops are used to ensure profits. This works in two ways. Firstly, it allows enough space to survive minor fluctuations in the market trends. By leaving a breathing space for such market drops, it ensures that the accumulated profit does not get wiped out easily. Secondly, if the market falls, it takes the trader out of the scene immediately, thus limiting losses.

Initial Stops: These are stops placed when the trade is first started. Unlike trailing stops, which are placed after seeing the market conditions, initial stops are placed in order to help the trader exit a market that goes down near the beginning of the trade. Another striking difference lies in the fact that the stops are placed a lot nearer to the starting point. This way the trade is closed with minimal losses.

Profit Based Exit: These exit points are defined once a target profit amount has been reached. For example, a trader could place a strategy according to which he will exit the trade after attaining, say, 100 or 150 pips worth of profits. The biggest advantage of this policy is that by using it, greed is limited.

Exit based on Market Announcements: This is a trick by forex market experts who do not trade using stops. It involves constantly keeping track of all the factors that affect forex trends or by using forex alerts. However, this method is best suited for veterans only.

Breakeven Exit: These stops are placed slightly above the entry points. They are best used by day traders who earn their profits through small changes in the market listings.