Winning trades is the desire of every trader.
But how we manage trade should be a concern to the forex traders so as to maximize the profits while minimizing losses.
Several methods are available to manage the wins in forex trading, but most forex traders will advise you to let your profits run.
Before you decide on what to do with your trade wins, let explore the methods to manage winning forex trades.
Methods for Managing Winning Trades
Let your profits run is one of the methods forex winners apply to manage the wins in forex trading.
As much it may appeal to you, this is not the only method, nor is it the golden rule for managing winning trades in any financial trading.
The winning trader primarily has a forex winning strategy with a good risk-reward ratio. This means that the winning trade should be greater than the risked money.
Hence, the winning trade should pay you more than the loss incurred in a losing trade. Let your profits run is common advice that you will hear in forex trading.
However, it is important to differentiate a trade from a long term position forex trading. If you are a type of position trader in forex trading, you must let your profits run.
If you aim to have a forex trading portfolio, then it is okay to let your profits run. The idea of a forex portfolio is of the utmost importance in your forex winning strategy then.
You establish a forex investment portfolio that you hardly touch while letting your profits run.
While it is normal and acceptable for forex winners to lose on some trades and win on others, the novice and undisciplined forex traders often give in to forex emotions and quickly exit a winning trade too soon.
They fail to realize the importance of letting profits run- it is impossible to make profits while letting losses run and not letting your profits run.
What are the Options?
Different types of forex traders use different forex tricks to winning trades management.
According to traders guide to forex, there are three options for managing forex winning strategy:
- Let your profits run.
- Take profit.
- Hybrid method.
If your forex winning strategy is to take profits, then you must set a take profit order that will be executed automatically.
In line with traders guide to forex trading, your decision to let your profits run or take profit should be arrived at before opening a position.
While some traders may prefer to take profit or let profits run, others may opt to combine the two options.
Let Your Profits Run
Letting your profits run implies allowing a winning trade to run until the gainful trend is exploited to the maximum.
The let your profits run trader do not focus on one trade but believe that profitability is achieved from a few winning trades over time.
There are two options to use as you let your profits run in winning trades:
1. Trailing Stop Loss Strategy
This is a type of stop-loss that trails a winning trade by a set pip differential.
If your favorable trade goes up, the trailing stop loss also goes up in correspondence to the pip differential that you put in place.
In case the market trend reverses and goes below the last point of your trailing stop loss, the position closes automatically, and you keep the profits.
Whenever you opt for this strategy, rest assured that your gains are protected.
2. Manual Exit
As you contemplate whether to let your profits run until the trend is exhausted or not, you can still exit without waiting for the market trend to start reversing.
Exiting a winning trade manually depends on your technical analysis of the forex market trends to be on the possible highest price level.
You can then exit the trade at the op tune point without relying on stop orders to take your profits.
For example, if EUR/USD currency pairs on an upward trend start to have dismal price increases, you can close your position and grab your gains.
This method requires the trader to monitor the forex market constantly personally.
Taking Profit Method
The other method to manage winning trades in forex is the taking profit once the profit target is reached.
This method allows a forex trader to protect his/her capital by removing the gains made in a winning trade in line with the profit target.
For example, if you target 100 pips in a 10,000 capital, you can close out a part of that trade to remove the $100 you made on the 10,000 lot size. The capital remains in the trade until another order is executed.
Forex Traders using this strategy strongly believe that letting your profits run is a sure way to lose trade focus and thus give in to greed.
Never forget that the emotion of greed is quite dangerous as it puts your gains and capital at risk.
Traders applying this method mostly focus on one trade at a time before moving to the next one while trading strictly on profit targets.
Most of them cannot bear the pains and mental anguish of seeing their wins evaporate as the forex market reverses its trend.
Therefore, they are comfortable with their targets, usually a percentage of their capital, such as 10%.
Hybrid Method
A trader can comfortably use either of the two above, but can also combine them to manage forex winning trades.
The combined method, simply known as the hybrid method is applicable in situations where there is a price rally.
After reaching your target in the profit taking method, you can then initiate the trailing stop loss strategy to trail the price movement.
If the price movement continues upwards, you make more profits. And, if the trend reverses, the stop loss strategy will safeguard your gains.
Conclusion
Avoid falling prey to the emotion of greed while letting profits run for bigger profits.
Making this terrible mistake could potentially lead to massive losses, including wiping out your capital.
This mistake should not happen if you hope to be in forex trading for a long time and be profitable in the long run.
Take your profits and remain in the trade with protection orders in place.
Discipline, risk management, and forex winning strategy are the main forex tricks to winning trades.
But always remind yourself the main reason to manage your winning trades-maximize on gains while minimizing your losses.
Now Your Call
Do these methods of managing winning trades help change your perspective?
Make sure to share your thoughts below.
Till then – Happy Trading!
