A question most traders ask is when to enter a trade. This is very important to know the best entry moments, to recognise patterns and to be familiar with the indicators that help in these tasks. But knowing when to exit is no less important. The success of your transactions depends on when you start and when you finish. So let’s focus today on the second part.
After you read this article you will know three most commonly used exit strategies for the CFD trading.
Leaving based on time
In the first strategy, the crucial element is time. The time you will spend on one particular trade, to be precise. It involves defining the longest amount of time you will keep a position open. The exact time will depend largely on your preferences and type of trading you are following. But the rule is not to overcome the time you had previously defined. So even if the trade is not bringing a profit, you will exit it after the time has passed and will seek some other opportunity.
This method is designed for the sideways market and the situation when the trend is developing against you. It is not very complicated and can save you some serious loss.
Setting stop-loss and take-profit
A trade can end either in loss or a profit. There are always these two options when you think about your transaction’s outcome. And there is a very powerful strategy that requires setting stop-loss and take-profit. In fact, every trader should be familiar with this exit strategy and practice defining the most effective ratios for it.
Stop-loss is a function that protects a trader’s account from too harmful loss. Once the price of the asset reaches a pre-set level, a transaction will be closed automatically.
Similarly, a trade will be automatically closed when the price will achieve a take-profit level. This function secures generated profit.
Setting trailing stop-loss
Trailing stop-loss is different from the regular one in the way that this one is moving. When the price is moving in the desired direction, a stop-loss will move accordingly. Such a feature allows optimizing the outcome. Thank to trailing stop-loss you will be able to earn a bigger profit.
Check with your broker what are the conditions for trailing stop-loss on the platform you are using.
These were three simple, yet effective exit strategies for CFD trades. There are, naturally, more. So you should keep reading, learn continuously and adjust the strategies to personal needs. To be successful in trading you must never stop growing.
All the best!