aximtrade:The Top 5 Profit Taking Strategies in Forex Trading

Profit Taking Strategy

A profit taking strategy defines what exactly a trader should exit a trade to realize maximum profits. Sometimes, it is also used to cut losses early. This is why it is also known as an exit strategy. Most traders do not follow a take profit strategy claiming that they will exit when they make enough money. The problem with the forex market, or any financial market, is theres nothing as “enough money”.

Without a profit taking strategy in place, a trader can fell in the trap of emotional trading. This is because the market can generate emotional responses like greed expecting the market to be in the trades favor for long. But in such dynamic markets, trends can change in the blink of an eye.

Top Profit Taking Strategies

1. Support and Resistance

Taking profits atsupport and resistancelevels is a very common profit taking strategy. They are predetermined levels at which the price is expected to reverse.It is popular inrange trading.

Asupport levelis where the price tends to find support and reverse to the upside. It is a price level at which the price is more likely to bounce off rather than continue falling. However, by breaching this level, the price is likely to continue falling until the next support level.

Aresistance levelis where the price tends to find resistance as it rises, and is most likely to reverse to the downside. It is the opposite of a support level. It means that the price is more likely to retreat from this level rather than break through it. By breaching this level, it is likely the price will continue rising until the next resistance level.

In long positions, traders place take profit below the nearest resistance level while setting the stop loss above the nearest support level. While in short positions, the take profit is selected above the nearest support and stop loss is placed below the resistance level.

2. Candlestick Patterns

Candlestick patternsare price patterns that are formed over time and believed to have a repetitive nature. It means that these patterns are repeated every while and reflect the emotional reaction of the traders to the prices. They are used to recognize a trend continuity or reversal by reflecting the buying and selling forces.

In Forex, candlestick patterns help traders identify trend reversals and breakouts. They are more useful when combined with technical analysis to selectentry and exit points.

Read more about Top 5 Profit Taking Strategieson AximDailyto learn more and how to create your own strategy for profit.

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