If you are a forex trader or planning to become one in the future, one of the main hurdles you come across during the trading process is exiting your trades at the right time. The point at which you exit your trade or close a position will decide the ultimate result of your trade. But most traders need help determining the optimal exit point for a trade. Each and every forex trader must have had an experience where they regret exiting a trade way too early. This is a very common problem faced by traders, and today, we will teach you to avoid common mistakes in trading by using the appropriate forex tools in the best possible manner.
Why Do You Exit Trades Too Early?
Before learning about the tools and tips that can help you avoid early exits, we will try to understand the reason behind this habit of closing your positions before the set targets are hit. The primary reason for this tendency of traders to exit their trades could be the fear of losses. Most traders tend to close their winning trades as fast as possible because they fear losing profits due to a trend reversal. But most of the time, these trades could have generated more profits if traders were brave enough to let them run for some more time.
The case is similar for losing trades, too, as traders tend to exit the losing trade even before the set stop loss levels are reached. They think there is no point in waiting and try to minimise the losses. But such trades may turn out to be profitable later on due to a potential trend reversal. Many traders are also impatient to hold onto a trade as they get hit by anxiety, stress and self-doubt. So, they choose to get done with the trade and feel at ease quickly. The root cause of all these behaviours is always the emotions that divert us from our target.
Planning for the worst possible scenario is important for risk management. But you should remember that the stop loss and take profit levels are set to safeguard your account balance in any situation. For this, you can use a pip calculator, which helps you determine profits and manage risks effectively. As a result, you are better aware of when to exit a particular trade. Hence, manually exiting these trades could be better, as you already set automated exits.
Main Contributing Factors to Early Trade Exits
How to Stop Yourself from Exiting Trades Early?
Firstly, you need to understand the reason behind your decision to exit trades early and see if that reason is actually rational or just an emotional bias. One strategy that you can try to let go of this habit is the ‘set and forget trading’. Instead of keeping your eyes glued to the screen all the time, learn to stay away from your monitor after setting your exit targets which include stop loss and take profit orders for the trades. Here, set and forget does not mean forgetting about the trade, but don’t keep yourself attached to the trade. Try to engage your mind elsewhere after opening a position. The trade will run independently and close at the right time when the price targets are touched.
How To Deal With Each Scenario That Makes Us Think Of An Early Exit?
Conclusion
To sum it up, automated stop losses and take profits are the key forex tools to exit your trades at the right time and price. It takes a conscious effort to stop yourself from exiting all trades too early. Building trading discipline and developing emotional stability are some methods that we can recommend for breaking this habit.
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