By Warren Seah
Partial Close method allows forex traders to scale out of their positions at pre-set take profit levels. When a market price hit the pre-determined level, a certain percentage of contract will exit taking first profits. Next, the trader will shift his stop loss to entry price so that the remaining positions will not result in a loss if market decides to reverse and head in another direction.
It is flexible because it extract profits out and allow the remaining positions to ride the trends. The worst case that will happen is that trend exhaustion in which the market reverse and hit your stop loss level at break- even price resulting in a no loss no win scenario. Hence, this method is usually called ‘Pip Protection Mechanism.’
Using Partial Close for Day Trading
When we are short-term trading or day trading, we try to go with multiple contracts that give us the freedom to take a portion of our positions off at a profit that is based on market structure and short-term behaviour, letting us allow the balance to run on the basis of longer-term market behaviour. Partial close method allows for short term trading and also the benefits of riding on longer term trends and profiting from them.
There is a tendency for traders to take on excessive risk while trading multiple contracts. It is very important to only trade which 1-2% risk per trade or 5% maximum risk per day. Sound money management is what keeps the professional traders from making money consistently in the long term. Protect your investment equity like you would protect yourself from hazards.
Partial Close strategies is a trading exit plan – a definitive document that spells out everything you will do as a forex trader. It specifies the predefined price at which you will exit portion of contract sizes; partial close methods and trailing stop strategies you will use while managing opened trades. More important, it is a road map you can consult at any time before entering a trade, during the management of trade, and after a trade.
Applying partial close method should put you in higher percentage of winning trades and improve your forex profits while leveraging from short-term and longer-term market behaviour. The key is to plan your trade exits in advance so you can better manage trade decisions while keeping emotions trading at bay.
Quoting Sun Tzu said in the Art of War:
“Planning is a great matter to a general [trader]; it is the ground of death and of life; it is the way of survival and of destruction, and must be examined… Before doing battle, one calculates and will win, because many calculations were made.”
Proper exit strategies will optimise forex trading profits, having sound exit plans removes a lot of trading stress. It stands to follow that having a clear head and solid plan, your trading has a better chance of surviving and thriving.
About the Author
Warren Seah
“Introducing 11 Exit Strategies, What Every Disciplined Traders Need … Go Without It You Could End Up Being A PIP VICTIM Just Like Thousands Of Traders Out There.”
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