Lesson 12 how to trade what's in front of you with a complex exit strategy. Welcome to Lesson 12. My name is Sam ADA. I'm a global macro Currency Trader in the owner of FX renewed calm. This is the advanced forex course for smart traders. market was a microcosm, don't worry about what the markets are going to do.
Worry about what you are going to do in response to the market. After you get into your trade, different things happen. Very rarely does your trade go in a straight line to your profit objective. So if you only have one tool in your toolbox, you're going to struggle to react effectively to what is happening in front of you. If you only have a hammer, everything is going to look like a nail even when you're trying to screaming for a screwdriver. Or a measuring tape.
Instead Packer toolbox full of different tools for different scenarios. That way when the moment calls for it, you can appropriately make the right decisions about when to stay in your trade and when to exit based on what the market is doing at the time. simple interest versus complex exits and listen teen we learned that your actual role for getting into the trade should be simple. complexity is the enemy of decisiveness. Then why am I saying you should have a complex exit strategy? Well, each component of your exit strategy on its own is quite simple.
Combined together they form a complex exit strategy. Contrary to the popular wisdom that a simple trading plan is better exits need to be able to cater for too many different circumstances to be simple. It's better for you to have a clear set of roles that will allow you to manage risk and protect your profits depending on what the market does. decision points, the market is going to force you to make decisions. Throughout your trade the market is going to throw you all sorts of different scenarios is going to force you to make decisions about what to do constantly. Often it will be best to sit tight and do nothing, but there will be times when action should be taken.
It is at each of these decision points that your complex exit strategy comes into play. You will need to assess the current market and apply the right tool for the job to manage your trade properly. A decision point could arise because of market action. Or it could arise because a pre planned price was hurt. A reversal pattern could form or the price could reverse a number of our multiples and you need to decide if you're going to stay in the trade. Or if it's time to exit and reduce your position size.
Be aware that these decision points are going to happen and be really act when they do. trading. What's in front of you is all about being prepared. market was really a market said Your job is to follow the system. If the system does something that results in losses, that's just an expected part of the system. In developing your complex exit strategy, it is important to understand market types.
If you know what market type the currency pair is and then you can predict what might follow next. Learn to expect what's come next and play the probabilities. In developing your complex exit strategy. It's important to understand market types. If you know what market type the currency appears and then you can predict what might follow next. For example, a bowl normal market type will often transition into a bull volatile and in a bull volatile, sideways but falling into a bear market.
If you know this is the probable outcome you can play in your exits accordingly. market was Larry Benedict said, I let the market dictate to me how I should be trading, not my macro views of what I think the market will do. Developing your complex exit strategy. As you develop your trading system, you need to build a set of rules that fit you in fits the other components of your trading plan, such as your entry and trading timeframe. Let's now look at some specific exits that you might be able to want to call on. Profit objective when your trade hits your profit objective you have a number of options.
You could close the position manually, have a set profit target automatically close the position, tighten the stop loss and make the position run. Take off some of the position in the restaurant, make no changes and continue to trade or wait for a reversal signal. That is a balance between letting your profits run and locking in your gains. What you do here will very much depend on your trading style. And personality venture tried draw down. One of the cardinal sins that amateur traders engage in is leading winning trades turned into losing trades.
To stop the scenario from happening, you can apply a maximum enter trade drawdown role, or amount you're willing to give back in order to achieve further gains. market was at modern Tyler said you have to always be pragmatic enough to move with the market. reversal right after entry. You have patiently waited for your entry and seemingly timed it to perfection. But as soon as you enter the market forms a reversal signal. If this happens to you, you are faced with a decision point to exit the position lighten it or leave it and see what happens.
The trading trade most elite in your favor and then reverses sometimes your trade what you into a nice efficient phase where it steadily moves in your direction. It is easy to continue to hold the position during this period. But what do you do when the market starts to reverse the trade immediately, or you decide to hang on until the train reestablishes itself? It is important to consider your objective for the trade when you make this decision. market was it. William ecat said the sharpness of the move indicates that volatility has just increased hints even a windfall profit might dissipate rapidly.
Politic volatile fast moving markets in your favor. Contrary to popular belief, it is good to tighten your stop. When the market moves quickly in your direction. fast moving markets can rapidly reverse and chew through the profits you have made. It's best to lock profits in and wait for a reentry. Sometimes this will mean you miss out on a move if you get stopped out.
But more often than not will save your skin volatile fast moving markets against you. One of the more uncomfortable scenarios to face is when the market moves suddenly against you. This can happen when there's unexpected news, a global macro event, or a sudden change in supply and demand. If this happens, you have a couple of choices depending on your trading style and your view of the strength of the reason for the drop, you could get out immediately and take the loss or you could wait and hope that the position rebounds in your favor. This can be a very challenging decision to make. But whatever you do keep risk management at the top of your mind.
The price gets close to your profit target and starts to fall away. And all too common occurrence for the trader is to have the trade going almost to the profit target, not quite hitting it and then falling all the way down to the stop loss. This is the classic tuning a winner into a loser trap. Not only does this cost the trader profits, but it can be frustrating inside ecologically damaging in the long run. A remedy for this oh is to make sure your risk reward ratio during a trade is never worse than one to one. For example, if the currency Price Is 10 pips away from your profit target, and your stop loss is 50 pips in the opposite direction, you would have a terrible risk reward of one to five.
That is you're risking 50 pips in order to make an additional team. In this case, you would tighten your stop to within 10 pips of the current price, dynamically reestablishing the one to one risk reward ratio, the six that has the effect of tightening your stop once you get close to your profit target. Chart pattern reversals. Often the chart acts as a window into the soul of a trade, you'll see that the price is about to reverse, and now is the time to act to protect your profits. But some reversals are not as strong as others and you don't want to be cutting your profit short by exiting on weak signals. It will be tempting to close your trades early If you don't have this aspect of your exit strategy down pat, if you do see a reversal and are unsure if you should close your position or not, then you can always scale out or move your stop higher.
Fundamental or sentiment conditions change. If you experience of changing the news cycle from positive to negative, it can be a good time to exit your position. For example, if the market was ignoring bad news and continuing to push higher, then you would continue with the trade. But if all of a sudden the market starts to sell off during bad news, then you know that something has changed either fundamentally or sentimentally and it's time to sell summary it could be a macro event or other news that could drive a sudden change in the price movement of the currency peer your trading. If your assessment is that this reversal is likely to continue being you should close the trade. Keeping it simple.
For the newbie trader. This might seem like a lot of work and it is different is important to make it easy on you When you first start to define your complex exit strategy Firstly, you should make some choices about what to do when the price hits your profit target. Secondly, you want to have a maximum enter trade drawdown stop if the price starts to reverse against you. And thirdly, you want to stop for fast moving markets, that is have markets rapidly move in your favor. Next, you could investigate some stocks based on chart pen reversals. candlestick patterns work well for identifying these reversals, particularly in combination with support and resistance.
Market was at William he said don't think about what the markets are going to do. You have absolutely no control over that think about what you're going to do if it gets a trade in the moment with the market. By implementing a complex exit strategy. You have the tools you need to be in the moment with the market and trade what's in front of you. Putting together a set of exit roles is going to take some time and that is okay. You can start by using the key simpler approach covered earlier.
Over time, you can add more roles as your market mass develops. For this week's coursework, you can start to define your exit strategy. I'll see you in the next lesson.