Well to tell you the truth, there are many forex traders that take profits too early while the market has not given them the indication or signal that it is about to reversed.
Instead of making a 150 pips profit, you will only make 30 pips profit.
Actually profits don’t run, they either increase or decrease depending on where price is in relation to your entry price level.
In this post, I’m going to show you a simple yet powerful technique for letting your trading profits run.
Now, here’s the thing…I do use this technique as well so I’m not writing this just based of reading somebody else’s work on the net.
And believe me, once you start using it properly, you’ll see how powerful it can be because with this technique, you can ride out most of a trend’s move.
But first, if you don’t know what let your profits run means or you don’t know its advantages and disadvantages, then here are some explanation of that…
Definition of Let Your Profits Run
So when they say let your profits run, it simply means:
- to let your profits increase.
- It also means do not exit a trade too soon when there’s a chance that your can make more profit from the trend that is still intact
So that is the definition of letting your profit run.
Advantages of Letting Your Profits Run
Here are the advantages of letting your profits run:
- you increase your risk:reward ratio immensely
- you never know when the trend will end…it could go on for many many days and you will make a lot or profits
- its stops you from exiting a trade too early but not many forex traders know how to do this properly and
Why Many Traders Have Difficulty Letting Profits Run
It is much easier to say about it than doing it when it comes to letting trading profits run.
I’ve placed trades where I figured that the market would move strongly in a trend but soon as as I has a reasonable amount of profit, I exited too quickly. I didn’t stick to the original plan on where I thought the market would go.
A few weeks later, I check the charts and realize that I exited too early, If I had not exited too early, I could have made a 1000 pips profit instead of a 100 pips. I used to feel like beating myself up!
So what causes many traders not letting their trading profits run then? Well, from my own experience, these are the things:
- the first sign of profit they see and they bail out of their trades too quickly even though their original plan was to let their profit run.
- not many forex traders understand the market structure of trends and that’s one main reason they exit their trades too early and because of this, the fear that they are going to loose their trading profits makes them take out their profits too early.
- they may have had a prior experience of seeing a good trade’s profit getting smaller and they exited that trade with a very small profit (even though it was huge at one stage) and their plan was to let the profits run but it did not work out as desired. Therefore these kinds of prior experience stops them from fully utilizing the power of letting your trading profits run.
So What Is The Solution Then?
One of the best solution to still keep a trade alive so that your trading profits can run is based on a simple line. Yes, not indicators, just a line.
Its a trend line.
Let me show you how a trend line can help you let your trading profits run with a few charts.
First lets assume that you are using the trendline trading strategy for entering a long trade as shown on the chart below:
As you can see, as soon as price breaks the rising trendline, it the trend was now in a downtrend.
On this second chart below, assume that a trade was taken when a breakout of a support level occurred. Staying with the trendline could have given you 570 pips profit.
As you can see, after the trade was exited, a short while later the market changed to an uptrend.
The only way you are going to really appreciate this technique is by opening up your charts and draw trendlines and observe how price has reacted to them.
This post here: how to draw trendlines will teach you about drawing trendlines the right way.
What Forex Trading Strategies Can You Use To Apply This Technique?
The answer: any trend trading system will do.
You see, this is about letting your profits run in a trend. So your forex trading system can be:
- a trendline trading strategy
- a trendline breakout strategy
- the floor traders method
- or can be the heiken ashi trading strategy
- or it can be the support and resistance forex trading strategy
- or it can be any moving average cross over forex trading system
As long as it is a trend trading strategy, you can use trend lines as a means to tell you when to exit your trade.
Hope you enjoyed this post on letting your profits run by using trendlines. Don’t forget to tweet, like or share this. Thanks