5 Exit Strategies Frequently Used by Forex Traders

Determining the right time to enter the market is important, but determining how to exit the market, both in a loss and profit situation, is equally crucial.

When trading, the first thing that comes to most traders' minds is how they enter the market. That's why they tend to rush when there's an opportunity. In fact, many traders lose their patience to wait for opportunities to appear, so they force themselves to enter the market, even though there are no trading signals that match the criteria they have set.

Rarely do traders think about how they will exit the market, in addition to thinking about how they will enter. Although by default most trading strategies have their own way of determining the exit level, most traders actually determine the exit after they open a position. In fact, exiting a trade is as important as entering it. It takes the right consideration from a technical and psychological point of view so that the exit made does not have a negative impact on the profits or losses obtained and a person's mental condition after experiencing these profits or losses.

There are often situations where traders hold a losing position for a long time, until the amount of loss becomes too large. Or situations where traders can't resist closing their trades immediately when their profits are still small. Such things, when done repeatedly, will make the trader's mental condition vulnerable to extreme market situations. For example, when market volatility is at its highest, they will tend to feel hesitant between holding their position or closing it. If they close their position, they will lose the opportunity to make large profits, because in conditions of high volatility, the market has a wider price movement range than usual. Meanwhile, if they continue to hold their position, they are afraid of experiencing large losses like before.

Therefore, planning how to exit at the beginning is very important for traders. Don't just determine how you will enter the market, but don't know how you will exit later. What exists, traders will only be confused and actually have a negative impact on themselves. Even if they profit, the profit obtained is also small, while when they lose, they will lose big.

Various Exit Methods in Trading

Many strategies are actually equipped with ways to exit trades, both when trading conditions are profitable and when trading conditions are losing. So, if traders are confused about how they should exit a trade, then they should reread or re-learn the trading strategy they are using.

However, of course, many does not mean all. Indeed, among trading strategies, some are not equipped with a way to exit the market. Which means traders who use this strategy must find their own way out. It may be easy for traders who are quite familiar with forex trading. However, it will certainly be difficult for beginners who have just learned and still have limited knowledge about trading.

Well, if you happen to be a beginner, or even someone who has been involved in forex trading for a long time, but the trading strategy you use happens to have no way to exit, then you can see some list of exit methods commonly used by traders as a reference. Perhaps one of these methods will suit the strategy you are using, or it could even be an insight to help you determine your own exit method.

#1 Support Resistance

The first and most frequently used method by traders is to use support and resistance or something similar. In this context, what is similar to support and resistance means that it has a similar concept, such as supply and demand, pivot points, dynamic support resistance, harmonic support resistance, round levels, and so on. So, it's not just classic support resistance which is determined based on levels that have a lot of pullbacks in the price movement history.

However, before you can use this method, there are certain requirements that you must meet. First, you must know how to determine support and resistance. You can use any method, either manually or automatically using technical indicators. Because support and resistance levels are usually subjective. This means that each trader may mark different supports and resistances. So, don't be surprised if your support and resistance levels are different from other people's, because that is very natural.

The second requirement is that you have standard criteria in determining support resistance. This means that when you are looking for support and resistance, you must have the same method that you can repeat over and over again. For example, if you see support resistance based on the number of candle tails that exist at a price level, then you must be consistent with that method. Don't let you determine support and resistance based on method A at one time, then use method B at another time. Because it will affect the consistency of the results that you will get in trading.

#2 Pip Distance

Apart from using support and resistance, another way is to use certain pip values, such as 50 pips, 100 pips, and so on. This method is also quite widely used among traders, because it is faster and easier. No need to look at the history of price movements backwards to find levels with lots of pullbacks in them. This is a method you can use if you find it difficult to determine support and resistance.

Although easy and fast, this method has its own risks. When the average daily movement range of the market changes, the probability of your trade can also change. Because it often happens that the average daily movement of the market changes every year; sometimes it can be wider than before, sometimes it can also be narrower. If the change in the average range actually increases the probability of your trade, of course that's a good thing. However, if it actually reduces the probability of trading, then you need to be prepared to find a solution, such as changing the pip value or finding another exit method.

#3 Opposite Pattern

Exiting using an opposite pattern or signal means exiting when a signal appears that is opposite to your position. For example, you buy, then when your position is profitable, a reversal sell signal appears not long after, then you can exit. Or when you buy, but your position is losing, and at that time a sell signal appears such as trend continuity patterns or the like, then you can exit.

This method is also quite easy to do and is quite widely used by traders. If you are quite active in several online forex forums, you will definitely find several people who use this method in their trading. Although in terms of numbers, maybe not as many as those who use the first and second methods.

Like the previous methods, there is a drawback to this exit method, namely when your position is losing. Relying on the opposite pattern to close a position when your position is losing is very risky. Because this pattern may only appear when the price has moved quite wide, meaning that at that time your loss has become quite large. In addition, you also have to routinely monitor the market so that when an opposite signal appears, you are not late to exit.

However, there is certainly a positive side, namely when your position is profitable and the market is in a trending condition. You can generate as much profit as possible. If you are trading gold, it is not impossible that you can generate several hundred pips or even a thousand pips in a single trade.

#4 Based on Time

If one to three are the exit methods most used by traders, the fourth is an exit method that is as popular as the first method but is rarely used by traders. This time the exit method is based on a certain time, it could be several hours, daily, or even weekly. This method is often discussed when we talk about trading styles, where when discussing intraday trading, it is often mentioned that intraday trading closes its position at the end of the day or before the daily candlestick changes.

Exiting based on time can be done when you want convenience but don't want to spend your time monitoring the market. Actually this method is effective, but there are concerns that the market will move significantly when the exit time has not yet arrived. Especially if the trading instrument used is one that has a wide range of motion, such as gold and cross pairs. So, some users often only use this exit method on instruments with a narrower price movement range and high liquidity, such as major pairs.

#5 Combination

The last exit method that is also often used by traders is a combination of two or more of the exit methods discussed previously. Some traders are caught using support and resistance to determine stop losses and take profits, but choose to exit when an opposite signal appears in the market, before their position reaches the support and resistance levels determined as targets and loss limits.

This method is the most flexible method and gives the impression of caution because not only one factor is considered, but several factors. However, according to some people, this method is considered not good because it shows an undisciplined attitude and inconsistent actions in trading. In fact, discipline and consistency are the main principles in trading, while using this method at the same time has violated both of these principles.

Another counter argument is that the same method gives the same results, while different methods will give different results. This means that if you use the support and resistance exit method at one time, your trades will have a certain level of success. If your trading success rate is high enough, you can maintain it by continuing to use the same exit method. Meanwhile, when you use a different exit method, your trading success rate can change. If it changes for the better, of course there is no problem. But what if it actually gets worse? Wouldn't that harm you?

Well, those are some exit methods that are popular and quite a lot are used in forex trading. Of course, none of these methods are perfect, they all have their own advantages and disadvantages. So

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