Forex Strategies for Profits
A Simple Forex Strategy To Increase Your Profits
There are a few forex strategies that you can use to increase your profits, no matter what forex trading system you may be using. Here is one simple trick that can help you to make more out of each successful trade.
Of course, all traders know that you should set a limit order or at least include a profit aim or closing signal in your plan and keep to it. It is important not to keep a winning trade open until the moment ‘feels right’. Either you are aiming for a certain number of pips or you are waiting for something like an oversold or overbought signal and then close immediately.
Keeping a trade open for an undefined time, hoping to make the most of it and profit from every last pip, is a road to ruin. Successful forex strategies are never based on feeling. Sure it is annoying to close out a trade at 50 pips and then see the trend continue to 200, but how often does that happen? We tend to remember trades like that and forget the others, so if you do not keep a record of what happened after you closed a trade, now is the time to start.
If it turns out to be true then you might want to back test the results of increasing your profit aim per trade, but in 90% of cases you will find that this does not happen often enough to justify that. What you may find, however, is that it is worth closing half of your position.
Of course, to do this you must either be trading more than one lot or have a broker that accepts fractional lots. You can set a limit order for the first half but you need to be watching the market so that at that time, you can set a new limit order for the second half and at the same time, move your stop loss. The new limit order could be half of your original profit target or it could be the same amount again, but not more.
There are several options for the positioning of the new stop and it is a good idea to back test these for your particular system. First option, if your stop was originally 20 pips out from your opening position, it now moves to 20 pips from the price at which you just closed half of the order.
Second option, your stop moves to your entry position plus or minus the spread. So if the trend now turns on you, you will have a profit on the first half of your trade and break even on the second half. Third option, the stop moves to half way between the opening price and the current price. What is best depends on the original position of your stop. Of course you do not want to move it so close to the current price that it is triggered too easily.
Equally, never be tempted to apply this technique to a losing trade. It would be a big mistake to only close half of a trade when it hit your stop, unless you are testing different positions for the stop. Forex strategies should maximize your profits, not your losses!
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