Protect your Profits
The forex market can move fast - gains can turn into losses within minutes. To manage your capital, you need to
protect your profits - even if it mean closing at only 15-20 pips at a time. They may seem like small dough,
but they can add up to a respectable 150-200 pips earnings over time. This approach may be slow, but the main
point of trading is always to minimize your losses and, along with that, to make money as often as possible.
You should have more winners than losers, and the losses should be smaller than the gains.
How do you protect your earnings?
There are 2 ways to never let a winner turn into a loser:
- Trail your stop
- Trade more than one lot
Trailing Stops
The Trailing Stop is used to lock in profits. For example, if you bought GBP/USD at 1.7480 and the price has
risen to 1.7520, giving you a profit of 40 pips, you may want to lock in a certain amount of that profit in case
the price falls back down. You would simply place a stop order to sell at, say, 1.7510. This assures that if the
price does drop, your position will be closed automatically with a profit of 30 pips. If the price keeps increasing
and the position becomes even more profitable, you may move your trailing stop up yet again, thereby "locking in"
more profits.
If you're aiming for a close target, say 15 pips, then as soon as you've reached your 15, move your stop to
breakeven. If the market reverses and takes out your stop, it is ok, since you end with no losses (or profits). If
it moves higher, with each 5-pip increment you boost up your stop from breakeven by 5 pips, slowly cashing in
gains.
On Metatrader, right-click on your open position, click 'trailing stop' and choose your preferred trailing
points. On the chart sample above, once you have achieved 34 pips profit, click on trailing stop, say 15 points.
Once your position reverses by 15 points, but you're still on the money by 19 pips (34 -15), your position will
close.
Trade more than one lot
You can trade multiple lots with mini-accounts. If you open two positions, lock in gains on the first lot and
move your stop to breakeven on the second lot. You can then ride the rest of the move using the second lot, playing
with the house's money.
Remember that you must have sufficient capital to trade multiple lots using the proper risk management rules, or
it is best to open just one position at a time.
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