Setting Forex Trading Targets will have both pros and cons. Every time I read posts and comments in various forums dedicated to Forex markets, I see Forex traders describing their methods of trading. Seeing this something has come to my attention that it is very common to try to gain control over the trading process by adopting targets for almost all variables. While this may be productive, it is also possible to get too rigid when trading in Forex. In this article, I will examine the pros and cons of each to help you create a more flexible trading strategy.
Forex Trading Targets
There are different shorts of Forex Trading Targets. It can very among traders. It is very common to hear traders say they will stop after winning or losing a certain number of operations per day. This makes sense or not depends largely on what kind of trading are carried out. If it is scalping or trading very short term, then this is a psychological defense mechanism that probably only limit the profitability of an effective trader. However, for the swing trader or traders in the longer term, such a rule is probably useful, because if the first two or three patterns fail quickly, they form a pattern of profit becomes increasingly unlikely.Also, if operations losses occur in the same area price it is likely not going to be a fruitful area in the very near future.
Of course, psychological defense mechanisms may protect against catastrophic losses, even if they are not statistically valid, and if the nerves of a trader are attacked by the loss of a number of consecutive operations, it is probably a good idea to stop operating at least the remainder of the session, until you can recover psychologically.
# Stop Loss
I often hear traders say that use a fixed stop loss of X number of pips, sometimes differentially defined between currency pairs, sometimes not. While this may work, it is a mistake because the stop loss should be defined by technical measurements or simply by volatility , both of which vary. For scalpers, who often use a tight stop loss this may not matter much, but for longer term traders is crucial to have the right stop loss. While I’m on the subject, I will say that Forex target stop loss will not necessarily be the “right”, but the need to ensure that we get trading profits as adjusted possible even at the expense of losing more number of trading in general.
# Take Profit
The objectives fixed gains may make sense as a good method of trading should produce a number of winning trades over time. The important thing is that profit targets are neither too small nor too large. Something in the range of double or triple the risk per trade (from the entry point to stop loss) is generally a good choice. However, you can also make more sense to keep pace with the market and let the trading are doing very well keep running, at least until they show signs of rotation. A productive compromise would be to take profits when the objectives are achieved very quickly, since such movements in Forex are often spikes that are easily undone, but otherwise we apply a trailing stop, but only once the price is near the goal. It also makes sense that profit targets are based on volatility, for example, if a stop loss is about a true mid-range any time period you are using, so profit taking is two or three times same amount respects the current pattern of market volatility and trading instrument.
# Pips per Day/Week/Month
It is very common to hear traders say they plan to do X number of pips profit per day, week or month. This is one of the silliest attitudes that can possibly have in trading, and is ruthlessly exploited by scammers who promise all sorts of unrealistic goals. It’s hard to know where to even begin to break this approach. First, there are times when you might be able to make 1000 pips in a month and then there are other times when even the most experienced and agile traders will struggle mightily just to avoid a loss. In second place, a “pip” could be worth twice in a currency pair in another, not to mention the different trading should have different sizes of stop loss, so that risk units are a significant extent, while that no pips.
Really, it makes sense not to have profit targets. What makes even more sense is to position itself to take advantage of what the market has to offer and this is best done by being prepared to take a week or a month of losses if necessary. There are few dumbest trading practices to be arbitrary targets with little or no consideration of market conditions.
# Risk Trading
Many traders have a rule that they risk the same percentage of your trading capital on each trade. This is a very good rule and makes sense. A variation is to risk a little less in trading that seem less promising and a little more in trading that seem most promising, but not by much. A good rule is to ensure that your risk per trade is not so large that suffer much if the trading turns out to be a loser, but not so small that it does not care at all what happens. This amount can vary greatly depending on individual circumstances.
# Trade with certain currency pairs
Sometimes I hear traders say that only trade with one or two currency pairs like EUR / USD and GBP / USD, which tend to be particular favorites. It is true that every currency pair has its own peculiar tendencies and it is also true that, depending on the limitations of the time zone, it may make sense to prefer to trade certain currencies that are most active at that time. However, it is absurd limited. For example, a few years ago there was an incredibly strong movement of several months in the USD/JPY. It was easy to make money by going over that pair, so why be restricted ?, what if your favorite couple just move, prefer to stay on the sidelines?
The Bottom Line: Forex Trading Targets
People are different, so are their financial goals. Usually, Forex Trading Targets is counterproductive too limited Forex trading. Traders will find greater success by adapting to market conditions rather than with a search for fixed targets, although, as we have seen, there are exceptions.Beginners may have to be limited more as they discover that they are too inexperienced to manage appropriately flexibility. A good answer for most traders is to start gently and slowly become more flexible as they go.
Get further help on Forex Trading targets from this article written by Mr. Tyler Yell, CMT, Forex Trading Instructor.