Preserving Your Profits

by Cynthia Macy, Co-Author of The Day Trade Forex Trading Systems

ADJUSTING YOUR STOP, otherwise known as using TRAILING STOPS:

A trailing stop is one that is adjusted to follow a trade in the direction of a profit, attempting to keep a particular distance without being backed away from holding a profit.

Explanation: if we are long, a trailing stop would follow the price up as the price moved up but would not be lowered if the price dropped.

Some trading platforms have an automated trailing stop that you can select;  in others, you have to manually adjust your trailing stop.

In each and every trade, your first goal is to move your initial stop loss to breakeven. This ensures a risk-free trade.

In a slow timeframe, I keep my trailing stop quite wide, as I don't want to be stopped out too soon. In a faster timeframe, I keep my trailing stop tighter.

In most cases, I'll keep adjusting my trailing stop every 15-25 pips, as the price moves in my desired direction.

After your breakeven goal is reached, you can then keep adjusting your stop loss every 15-25 pips, to lock in more profit, until you either decide to exit the trade with your captured intended profit, or until you get stopped out.

The closest I will keep moving my trailing stop is 7-10 pips. This is only in the 1 minute chart and only after I'm 10 pips in profit.

Often, when trading in the 1 minute chart, there is no time to adjust the stop to a break even, let alone keep moving it up. Sometimes, you have to be quick on your toes, as it can reverse quickly, and you need to keep your profit from turning into a loss, by simply taking your profit when you can.

Don't let yourself get stopped out and don't let your trade become a losing trade.

Grab even one pip if that's all you can get! You can't expect a lot if you're trading against the major trend.

Always check the major trend in at least a 30 min chart AND TRADE WITH THE TREND!

If you think you've gotten stopped out too soon, you can always jump back into the trade, if all your indicators are positive.  Use a 1 minute or 5 minute timeframe for re-entries.

*** Watch the MACD and the Momentum, they indicate the strength of the movement and the immediate direction. ***

If they break their zero lines at the same time, it is good for an entry or exit, depending on what you're trying to achieve.

Understanding Risk Management

Understanding risk management is a very important reality when trading the Forex Markets.

Losing trades will happen, and managing those losses are the key to success. A good rule of thumb when setting your stop losses is the 5-7% rule.

If your trading account is at $2000, then set your stop loss so that you don’t lose more than 5-7% of the total value of your account. If you used this rule in this case, you would stop out a losing trade when you were down $100-$140.

This is important, because if you don’t manage your losses well, you can easily lose 50% of your trading account on 1 bad trade. You do that a couple of times and you will lose all of your risk capital. It is better to take smaller losses and try to maximize your winning trades. So be careful and deliberate when setting your stops on your trading platform.

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