Losing a trade is a part of trading activity. Even the most professional traders would have experienced it more often than beginners. Although you have done your own research, been advised by a great mentor, and made a strategic plan, losing is still possible. Something can go wrong in your trade. But here’s where you will need to consider a clear exit trade plan.
The trade exits are very important to prevent further losses from happening. When a trader keeps losing deals, one needs to reform and move on. In many cases, traders might have set a stop-loss but then removed it to pursue more profits. What you won’t probably realize is that your position goes deeper into loss.
Sticking to your plan of exit is very important. Not only will it give you the chance to profit, but it will also protect your money from you. Here are the strategies that you can use so that you can exit without having to lose your money.
Stop-loss and take-profit
Stop-loss and take-profit have been important risk management tools for all traders.
The stop-loss won’t stop the trading until it reaches the loss amount that the trader accepts. That way, it will allow you to manage the losses.
Meanwhile, take-profit allows you to set a particular profit position that you want to accept. Unless the benchmark is reached, the deal will stay open.
Consider learning and practicing these effective tools so that you’ll have an ample exit plan.
Timed exits
The timed focus is on timing. It allows you to close the deal after a certain amount of time.
You can apply this strategy in flat market conditions or when managing your loss in a deal. It can be effective since the strategy forces you to close the trade at the exact time you’ve planned. However, this strategy could not work if the traders could not hold the temptation of FOMO, or fear of missing out, at bay. Not closing trades on time is one of the causes of pitfalls. You will need to stick to the risk management strategy for this reason.
Comprehending the stock trend
After understanding the technical analysis, you will understand the stock’s movement as well.
If you don’t understand the technical analysis yet, you could simply learn about it first. It is important to understand the key support and resistance levels before entering the trade. These levels can help you determine the areas where you should exit.
Many novice traders make mistakes by randomly entering without knowing their target or stop loss. You will always need an exit plan when going into a trade. In general, you want to sell positions near resistance and buy them near support.
What is your reason for selling?
To make the best exit strategy, you must know the reasons for selling. Keep in mind that your reasons should be logical ones. You cannot sell your positions based solely on emotions.
You need to have a good system and signals to identify the real trend. Put yourself in the shoes of people who want to take a position on the opposite side of your own trade. At what price those people will enter? You can also take on order books to see the volume of the trades during the trade.
There are a lot of things you can do to make the right exit. But the very first step to succeeding is to understand the market. The more you are familiar with the market, the higher your chances are of having a good exit.
