Many traders in the Forex market have had that one trade that was an absolute monster. It went parabolic and they’re up a hefty return. But then they struggled with the exit. This is why it’s incredibly important to plan your trade exit so you know how to get out of huge winning trades.
All too often traders or investors simply just get lucky and get in the right trade at the right time and enjoy the ride of a huge trend. It’s their patience to hold that trade that pays off and they end up catching a huge chunk of that trending move by letting their winners run. Sadly, it’s this same patience that becomes a liability when exiting the trade and many traders hold their position all the way back down, letting go of big profits. Here are a few tips on how not to cough up your Forex trading profits.
If they start frequently mentioning the Forex currency, commodity or stick ticker on CNBC, the end of the trend could be well on its way.
If a bull or bear is on the front cover of any newspaper (esp the Daily Telegraph), that market is likely close to ending.
If you’ve made a significant amount of money on a trade, and this trade makes you start dreaming of what big purchases you can make with the next move in your direction, then keep dreaming ‘cos you’re in trouble.
When people around you start talking about ‘why this trade can’t lose’, watch out.
When new ‘traders’ follow your trade and make some fast, easy money then give you grief about your conservative position sizing saying risk management isn’t needed… the end is nigh!
When a friend or family member that doesn’t trade calls you randomly to ask whether they should buy ’xyz’ odds are they’ll be amongst the last buyers and that trend is at its end.
When a trade reverses and people start thinking that the lower it goes, the better it looks… common sense has left the building and there are only fools rushing in.
Source: Vantage FX Blog