Forex trading has taken this century by storm, with more and more people turning to forex trading as a means of earning extra income from home. Although forex trading can be very profitable seldom few make ongoing long term profits from this volatile market. It is common to hear about how traders have been in profit then the trade has reversed and lost all their profits and more. It is learning how to manipulate ones stop loss and percentage of profit taking that can maximize profits on the forex market.
The forex market like other markets moves in waves, and it is successful traders that use the new highs and lows of these trended waves as entry points and profit targets in there trading. It is proven that one of the safest ways to trade the forex market is to take a slice out of an already confirmed trend by entering on its upward or downward push. It is then the manipulation of the stop loss to lock in profits a limit risk that is going to see success in the long term.
To make explaining this method as easy as possible I am going to use the popular currency pair GBP/USD. Imagine the trend of this volatile currency has just broken through a previous resistance level in a buy situation. You enter the trade as it makes a new high and it pushes you into 20 pips profit then the momentum slows down.
Now you have reached the 20 pip profit range it is often a time that the trend will reverse again before making another new high, you have to decide whether you want to take your profits now or risk them disappearing for good. It does not have to be as straight forward as taking all your profits in fact for successful traders it seldom is.
Using the example we started earlier you are now in a 20 pip profit situation with the trade starting to lose momentum. In this scenario I am going to tell you what I would do. I am trading at £10 a pip and I see that I am 20 pips in profit on a strong upward trend, but the trend is losing momentum so I take out 80% of my profits or £160. I then move my stop loss up to my entry level so the worst that can happen is my only profit is £160. In the likely event of the trend reversing back to just above its previous resistance (my entry point) and then continuing in the trended direction will see me maximize my profits at no further risk.
Weâd like to thank Miss Sue Lang on this great article.
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