My Number 1 Exit Strategy When Trading Forex

Catch up with our Senior Market Strategist and Trading mentor, as he outlines his number 1 exit strategy when trading Forex.

Many traders will tell you it isn't when you get in that matters, but where you get out that makes the biggest difference to your trading bottom line.

Of course, you cannot lock in a result until you sell, and how you manage an open trade is critical for all traders.

In this video, we run through a couple of exit strategies, taking into account the overall analysis of the trade to begin with, using higher and lower timeframes and also how to use limit orders to take profit when the opportunity arises.

Of course, not all trades allow the ability to hit the profit target, so we also need to be smart about protecting the downside when we are wrong. Capital preservation is vital when trading leveraged instruments and you must trade within your risk tolerance.

Click play on the video below to watch the full tutorial with example trades.

In the video above, I run through the following topics when discussing my number one exit strategy when trading Forex:

• Top down analysis
• High timeframe
• Support and resistance
• Limit order to take profit
• Live chart analysis showing you exactly how I determine my support or resistance targets.

Top down analysis

Now, the first part of my strategy starts with a top down analysis. So before taking a trade setup, I perform a complete top down analysis on the currency pair that I'm looking to trade. 

I start with a monthly chart first, then work down through the weekly daily on four hour charts before identifying a trade setup on the 15 minute chart. 

One of the key things I'm trying to ascertain is where is the most logical place to take profit based on higher timeframe, support or resistance. 

Higher time frame analysis

And the second part of my strategy is to determine the higher timeframe support and resistance. 

Identifying the support and resistance areas

Now I draw support and resistance on the monthly, weekly, and daily charts and extend them out into the future. 

I determine which support or resistance level has been contained price action over recent days, weeks, or months. 

And then I use a support or resistance level as my target and the support or resistance target that I use must offer me a risk reward of at least one to two or greater. 

Using limit orders to take profit

And the next part of my strategy is using a limit order to take profit. 

So my support or resistance target, I always set a limit order to take profit. 

Usually, I will set my limit order 10 pips before the supporter resistance target, just in case price, doesn't reach the support or resistance level, as this is often the case. And as I mentioned before, your profit target must offer a risk to reward of one to two or greater.

Now I never get greedy and cancel my limit order to take profit. I take profit and move on to the next trade. 

Moving across to a live chart for my top down analysis

Let's now have a look at a live chart. I'll perform a top down analysis and show you how I determine my support or resistance target.

Let’s jump into the MetaTrader 4 trading platform. Now, if you don't have one of these platforms, you can download a free demo account here. 

On the monthly chart of the EURUSD pair, I'm putting in my support and resistance. 

Current monthly support is this high just here, that's at 1.1239. Monthly resistance that I'll be using is up this high here at 1.1412.

I'll put in my monthly support and resistance. I'm going to go to my weekly chart, weekly timeframe and going to put my weekly level of support in. 

I'm going to use this lowest point down here at 1.1186. I always like to put in the exact numbers And weekly resistance is this level just up here, 1.1422. 

And then to my daily chart, let’s put in the support and resistance on the daily. 

Now, as I'm move on to the daily, I can start seeing consolidation. Resistance, I'm going to use this final high up here at 1.1360. And daily support down here at 1.1221. I say, let's put in the exact numbers.

Now, there’s going to be a trading for this pair, I can see that it's at the moment on the day charts and consolidation. 

My overall strategy would be to be trading down from day chart resistance to the level of support. Now, down here, I've got monthly support at 1.1239 and then day support at 1.1221. 

So the first level of support that's in way to move further down the chart is obviously monthly support, so a very obvious target that would be using is monthly support here at 1.1239. 

Let's now move it down to 4 hour charts so we can see it clearer. 

So here we are, 1.1239 is my monthly level support. 

If I did see a reason to take a trade up here at daily resistance, as we're in this consolidation range, I may have be looking to execute a trade to trade down the range. 

So looking to trade down the range, so as I'm doing my top down analysis, I would've determined that my key level of my first key level of support would be monthly support at 1.1239. So, I'd be using that as my support target, and then I'd be adding 10 pips to that. 

So I'd be placing my limit order to take profit 10 pips ahead of that level at 1.1249. Okay traders, this is how I determine my support or resistance target. 

Now, if you're interested in improving your trading, why not join me in my trading webinar series, and all those that attend the webinars, get full access to my own MT4 chart layouts, profiles, and indicators. To view the full list of MT4 tip and tricks click here.

Register for Duncan's new webinar trading schedule here https://acy.com/en/education/webinars 

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