Let’s have a look at one example applicable to world currency market. Imagine that you open a EUR/USD short position priced 1,2536. In the moment you are making this deal, support/resistance levels are 1,2500 and 1,2620. You activate your stop-loss at 1,2625 level and your profit target equals 1,2505. Thus, you may consider this position to be a one-day or 2-3 day position.
It means that you should close the position before it’s term runs out and it becomes hard to forecast (as the market will be much more different to what it used to be when you opened the position). Afterwards, once the deal is made, and you set primary stop-orders, you should watch the market happenings and technical indicators in order to match your orders to leaving points. The most important in this period is that you have to minimize your loss risks as the time comes closer to leaving the market. Normally, once a medium-term position is opened (2-4 days), it’s wise to decrease the stop-order level and profit target for 10-25 points every day.
As well global happenings are to be watched. It’s wise to decrease the stop-orders if some important news may mean serious situation changes and lead to your losses. If the current profit is quite considerable, you may just place your stop-order on the market entering point and this will secure your investment from any losses.
The general idea is to find the balance of considerable profits and greed with fear. As your position is getting older, your profit potential should be limited to a greater extend that will secure you from unnecessary losses.
As well, a real time currency market trader should always remember that if the market suddenly starts behaving in a strange manner, one should be much more cautious about leaving the market even if the position is still showing some profit.
Every currency forex market trading trader has their own strategy and trading habits. We hope that this article helps all of traders to better understand one of the most important things about currency market and brings more wisdom to placing stop-losses and it makes their results only better.
