All forex trading techniques provide a solution to the question of when to open as well as when to close a trade. However, the huge bulk of approaches practically do not respond to the concern of managing an open position successfully. Although it can boost earnings to a fantastic extent.
Currently, there are three most typical methods to handle an open position.
1. STOP LOSS As Well As TAKE PROFIT
The guidelines of classic forex trading in the foreign exchange market imply to maintain 2 orders that will close an open position without the engagement of a trader. Stop-loss closes the trade-in loss while take profit closes the trade in profit. The first technique is based on utilizing these 2 orders:
We set the stop-loss order at the support/resistance level, and also ignore the positioning of the take profit order. Because of this, the possible loss is purely limited, while the potential profit is not. This alternative is commonly used by seasoned traders that constantly monitor the characteristics of an open position.
We do the opposite; take profit is established, however, stop loss is not. The absence of a stop-loss permits a trader not to accept a loss on a deposit, but to utilize the stop loss to protect the profit just. Such a “manoeuvre” is really dangerous and also can result in a major loss. To use it, you must have comprehensive user experience as well as an understanding of the aspects affecting the price and also market systems.
2. UTILIZING TRAILING STOP
A trailing stop is a function built right into the MetaTrader 4. It allows you to establish a certain variety of pips, that if accomplished in a position, the stop loss will immediately be placed at breakeven and then as the position will keep relocating the profit, the stop loss will certainly maintain trailing as well. Even if the price turns around and also the trade closes with stop loss, the forex trader will certainly still wind up in profit.
A significant drawback of the trailing stop is that it can only function when the trading terminal is running, for that reason a VPS server is required for its constant use.
3. HEDGING POSITIONS
This alternative is extensively utilized in the foreign exchange market by hedge funds to decrease trading risks, yet it is likewise used by retail traders.
As whole terms, the significance of a hedge is to open up two multi-directional transactions for the same instrument.
There are several choices for hedging, and also some of them permit you to separate a trading deposit with virtually no risk, getting to boost profits several times. This is done as a result of a considerable rise in the volume of the 2nd opened transaction, while the stop loss at both positions is computed and set in both positions.
It’s disappointing to see the expanding profit in an open position that later closes with a much lower profit. That is why handling open positions, in addition to the calculation of entry and also exit points from the markets are considerable for the forex traders. There are many more methods to manage open positions, like, partial closing of a position, and so on.
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