Currency Trading – How To Hold On To Your Profits & Not Get Stopped Out To Soon!

By: Sacha Tarkovsky
Submitted: 2007-01-17 16:15:10
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It’s a myth that most currency traders are mostly wrong about market direction – they get it right a lot but never capitalize on the profit potential.

The problem is traders get stopped out to soon, then they see the trade pile up tens of thousands while they have minor profit, or worse a loss.

Let’s look at how to catch and hold trends and pile up some big profits.

In currency trading the way to do this is threefold. First look for the big trends, secondly time your entry and place your stop correctly and last but not least, trail your stop correctly to protect yourself as well as keep you in the market.

1. Look to catch the big trends

In currency trading there has been a big move toward day and swing trading but looking for these short term moves reduces your chances of success.

Quite simply, the odds are against you and the profits are too small to cover your inevitable losses.

In currency trading the major trends last many months or years and these are the ones you need to focus on.

Start in your currency trading by looking at the weekly chart to spot the major trends and time entry via the daily chart – There are only a few really big currency trends, so you will trade sparingly.

You are only looking to trade significant breaks of support or resistance or these areas holding on strength.

2. Entry and stop placement

In your currency trading you need to place your stop as soon as you enter and this is normally on a break of support or resistance ( here a breakout will quickly move in your favour or reverse so stops can be close ) alternatively, you may see support or resistance hold and trade accordingly.

This is a bit more difficult, so follow these rules.

Say you are trading into support levels – Don’t predict support will hold, use an oscillator such as the stochastic (see our other articles) and use it to trade price momentum coming off support i.e. enter on strength.

This way you will have confirmation that support has held and price momentum is going your way before entry.

In currency trading NEVER predict whether support will hold wait for prices to confirm.

Once this is done a stop close below support should be your exit level.

3. The hard bit! Staying in the trend

This is really where traders go wrong all the time in currency trading.

They get market direction right in their currency trading but can NEVER stay in the trend.

They do one of two things and their both BIG mistakes!

Don’t move stops quickly

Traders immediately try and move their stop and get caught by normal market reactions against the trade.

By trying to reduce the risk in their currency trading, they actually create it as they get hit on stop and miss the major move.

They snatch profits

In currency trading when a trader sees a move develop they get excited as profits build. A few hundred is nice then a few thousand and the trader start have to panic.

Each reaction against the major trend eats into the traders open equity profit and this causes emotional turmoil.

The bigger the profit becomes in currency trading the more likely he will snatch the profit before it gets away or worse, turns into a loss.

The trader banks the profit and is relieved to have a minor profit and then sees the trade make $10,000 $20,000 or more and he’s not in!

It takes courage and conviction to hold profits

Many people focus on discipline and taking losses quickly but that’s easy, running profits is the hard bit.

Here is some advice on how to hold profits in your currency trading

1. If you have confidence in your currency trading method and you have isolated a potential big move, look at the long term and leave your stop where it is until the trade is well under way.

2. Only look to exit this trend if there is a reversal of the trend i.e. penetration of the 40 day moving average. Do not focus on normal volatility against the major trend.

3. When you have a big profit move to protect it but tail the stop only behind major support levels – the trick is to move it slowly

Focus on the long term and hold

Keep in mind in currency trading that the major trends for last months or years (they reflect the economic cycle of the country and by their very nature these are long term) and you are only focusing on these, not the market noise.

Doing this in your currency trading will mean you can lose 80% of the time and still make huge profits over time - as your correct trades will pile up mega profits in your currency trading.

For more free info on catching and holding long term trends for huge profits get a FREE Trading Opportunities Newsletter and also a 100 page FREE Trader CD packed with tips and strategies to make you a better and more profitable trader at http://www.wellingtoncr.com

Article source: Expert Articles