Everyone is aware of very famous maxim of Forex that states,"Cut Your Losses, But Let Your Profit Runs". Sounds great, but how exactly do you maximize your profits? If you cannot develop a trading strategy to achieve this objective, then your chances of making a good Forex living are greatly diminished.
Holding The Winning Positions
Sometimes, it is so hard to hold on to winning trades. This is because the fears that can frequently arise at the sight of a large profit can entice you to close your positions prematurely. You could well do this action because you become scared that a sudden reversal will generate a significant loss.
Correct Stop-loss and Targets
If you were unfortunate to suffer a series of consequent losses, then you could experience a severe drop in confidence. You may then develop a tendency to snatch at smaller profits before they can achieve their real earning potential.
Sadly, you have probably entered good trading opportunities, but either took premature profits or you were stopped out. You could well have then watched in frustration as price proceeded in your chosen direction amassing significant profits, but without you participating any further.
You must understand that in order to become a successful trader that you will have to know how to select the correct strategy and to be able to manage risk once you have opened your positions. You must realise that there are no magic rules or easily obtained secrets with Forex trading. However, a well-designed trading strategy will generate profits if applied properly and consistently.
If you are a trend follower and are hoping to catch a large price movement, then it is crucial that you let your profits run.However, many trading strategies exit positions for other reasons such as a chosen time period, e.g. a few days after entry. Obviously, letting profits run is not an inherent part of this type of trading. You must realise as well that many traders believe that setting profit targets is one of the few ways to guarantee that you will achieve profits. This is because these actions can help to control your emotions.
In addition, you will find that if you try to attain a trading system capable of capturing large trends, then this action will generate many human emotions such as fear and greed that can have devastating effects on the standard of your trading decisions.
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