This article is dedicated to those of you who already have a trading account but haven’t managed to establish a trading routine yet. There’s so much to learn, and it can sometimes feel overwhelming. There are tutorials that show you how to use the trading platforms, and economic news releases that can help you find a currency pair to trade. What’s hard to find is an explanation of how high you should set your profit goals. Even more elusive is a clear rule for how long you should keep your orders open. Here’s a simple strategy for setting your exit points based on price history instead of profits or losses.
Stopping orders at the right time
If you’ve built your trading confidence on the Exness demo account, then you’ve probably seen some sizable profits and losses. Keep in mind that your trading goal is not to be consistently profitable—that’s not a realistic option. Keeping the total profits above the total losses is something full-time traders usually aim for, and there are many techniques that can help with that. Of course, that’s easier said than done, but there are some areas that more inexperienced traders often overlook.
Let’s say, you’ve got an open order on your trading platform. You’re hopefully thinking of setting your Stop Loss and Take Profit levels, but what you might not be sure about is the exit points. This is where the chart timeframes can help.
Firstly, just how long are you planning to keep your orders open? It’s the first thing to consider. If you place an EURUSD order for the day, your Take Profit and Stop Loss setting could be very different from an intended month-long order. Here’s why.
Timeframe analysis is primarily used for trend trading. For example, if you are thinking of trading XAUUSD, you might consider sticking to longer timeframes for analysis and speculation. This is because gold has a slow and slightly more predictable rise over the course of each year. It is considered by many traders as a long-term investment option. When you set your exit points, set your timeframe to show the big picture. If you plan to close the order in a month, what were the prices one month ago? Apply this logic to all your trades, then compare the historic price level with the current level of resistance.
In contrast, if you are day trading, don’t expect the prices to go far beyond what you’ve seen over the last 24-hours. Whatever levels prices reached last year shouldn’t influence your short-term orders.
Top trading tip
Ideally, you are looking for trends that are consistent on multiple timeframes. If, for example, both short-term and long-term trends have bullish indicators, a Buy order could be a strong option. If the short-term trend shows bearish tendencies within a long-term uptrend, caution is advised.
Reading price charts is not something that can be learned in a day. Like driving a car, you need to spend time practicing before you take to the highway. Make time to check the timeframes of multiple currency pairs each day. Look at the time period you intend to trade and take detailed notes on price history. How much movement occurred over how much time? Make conclusions and write down why you think a Buy or Sell order is favorable, then go back to previous conclusions and see if you were right or wrong.
As you learn from your mistakes, your perceptions of the market’s ebb and flow will change. Remember, the goal of this strategy is to have more profits than losses. You’ll never win them all, but there’s always room for improvement.
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