The subject ‘Money and Risk Management’ is a comprehensive topic. It is the key to making unprofitable trades, somehow tolerable. This time, we are going to tackle the principle of setting a target when you enter a trade in the market. Combined with calculating the profit potential as well as the risk-reward ratio determines a good Forex trading plan.
Defining Targets When You Enter The Market
The entry points in the market are all based on the support and resistance levels. Other things like targets and exit points set itself on the price levels. Let’s say that the market is constantly falling a couple of times. The highs that you see on the chart will still be lower compared to the previous ones. The price was then closed right above the next resistance level.
Seeing that the market is moving in a different direction for some time, then it reverses, means that you are at the start of a new trend. If you are in a new trend, you can be positive when it comes to making predictions to set targets in the Forex market.
False Optimism To Determine Market’s Exit Points
Greed associated with trading will lead to disaster. False optimism, for instance, the trader is eager to make a profit of $1000. After that, the trader opens a position based only on his appetite to gain more profit. Guided by this trading principle, the trader sets the target too far but finds out that the market has reversed even before it hits the target. Despite the profitable trade, the result will become worse more than you expected it to be. Aside from that, the profit on this trade is much lower.
Set Targets Upon Entering The Market
A trend that evolves for a long time tends to change, then this results in a very appealing entry point. Once the price goes in the direction of the reversal, the particular entry point near the current price zones can possibly make a profit-loss ratio.
Those entry points created during the market reversal allows the entry of a potential profit that’s low risk. The question “How strong the trend can become” and “How rapidly does the market move on this trend” will never have a definite answer. Therefore, you should focus more on the realities of the market and risk management as well.
Forex Trading Advice – Protect the Floating Profit Near the Target
Opening a buy position should, one must choose a resistance level with a large timeframe. You cannot expect it to grow linearly, reaching the target after a few candles. This is a justified desire because when you open a Forex trading position, you are eager to close it as soon as possible as long as there is profit. But then, movements in the FX market is not linear, there are times when the market can slow down when the support and resistance level draws near. If this happens, you may close a position or you can protect the floating profit by purchasing an option.