- Analyst AZA
Closing position and taking profit
Many traders, working at the Forex market, using exchange-traded stocks and indices in their trade, closing deals in the futures market trading in oil, gold and silver, are united with one question - when to take profit and exit the market?
All traders in the world are busy with this question.
When you open a position, you never know how long the trend last and when it begins to turn around. Of course, everyone wants to make money by trading on the stock exchange, but many do not understand when it is time to get out of the open position and take profit. If you leave too early from the price movement you thereby make a mistake. After all, one good move can make your trading account with your broker very profitable. Basic truth is - let profit rise and cut losses immediately, while they are small. These fundamental truth hardly get into the mind of traders. It seems that everybody aware of this and it is silly to argue with, but still people do things their own way, cutting profit as soon as they see small plus, but prefer to keep the negative transactions as long as they do not turn into a nightmare minus.
Taking profit too early is the same mistake as many others, only inconspicuous, because you are in profit. First, trading is an equity management. Traders do not like managing equity, they prefer a quick buck and do not think about the long goal. Also ratio of your losing trades and their total minus and your trades to their total plus is important thing in trading. You have to earn several times more than you can lose on each trade. Once again, that no matter what markets you trade and what trading strategies apply, the management of your profit is the most important. But only few can stay in position for a long time, when the inner voice says that now it is time to take the profit, until it turned into a zero or negative. To become an expressed experienced trader you need to have iron balls.
Only the trader with the self-discipline and clear view of the market situation is able to keep his inner impulses. If your income has not yet been several times greater than the potential loss that you have laid in the transaction, it is necessary to sit still in the transaction. The best trends usually last for two to three trading days, after which it is necessary to review the market situation and, if it is clear that the market was blown away, and ran out of gas in the engine of the trend, it's time to go away, at the same time to earn enough that you could make a mistake a few times and still remain in plus. Usually happens, the trader makes dozens of successful transactions, in each captures something, happy with profit as a child, and here, finally, think that he know trading and now can show the world his experience and earn a lot of money. But then one bad deal negates all of its benefits and balance of a real trading account becomes negative. Damn, what is it? I'm ten times correctly guessed the direction of the market, was in right direction, so what happened? It is called wrong management of equity. If you repeatedly take away small profit, then you should give the market even lower. But, unfortunately, all traders consider themselves smarter than everyone else, and completely forget these truth. If trader is smart enough to stop and analyze his transaction statistics, then he has chances to become a profitable trader. And if you does not keep statistics and does not analyze anything, than listen to our advice, and you can earn money on the stock exchange.
So don’t be greedy, if you analyzed the market situation, entered into a transaction and decided to take profit. If the price has reached your level of income, fix it. Often, the trader awakens greed, and it seems that the market is still going on, because it has already passed the goal, but then the price of hanging in place and begins to fall back to the entry point. And it turns out that you seem to have done everything right, analyzed and entered in position, but were left with nothing. Therefore, if you decide to fix a certain level of profit do it.
So don’t be greedy, if you analyzed the market situation, entered into a transaction and decided to take profit.