Top 3 Exit Indicators In Forex Trading

Timing is very important in Forex. When you enter a position too early, you might miss the most profitable opportunity. Holding on to a position for long will make your profit margin come crashing. If you enter the position late, you will miss the price movement that will help you generate more profits. These things will put your trading account at risk. 

Experienced traders know this fact and the importance of timing when entering and closing a trade. Considering that, exit indicators are vital because it offers you the foresight as well as the information that you need to properly identify the correct exit opportunity which will allow you to reap profits. But first, you need to be familiar with these exit indicators so you will know how to use them properly and use them in your strategies.

Stop Limit

One of the most common and also most helpful exit strategy tools is a stop limit. It will guard your account againsthuge losses when the price movement is against your predictions. This is especially useful for beginners in the market since it takes responsibility for your decision to exit the trade. With stop-limit, you are greatly protected from impulsive decisions which could wipe out the money in your account.

When using this exit strategy, traders will have to point out the lines of support and resistance found in the price movement of your chosen currency pair. After identifying your support and resistance, you can now place the stop below the support and another stop near the resistance. This will exit a position automatically. 

Moving Average

Another exit indicator is the moving average. It is used by beginners in trading and experienced ones as well. The moving average follows a simple concept – by the time the price movement of a currency pair goes below the moving average, this means that you should sell your position or an exit of position.

This indicator is effective since the price crossover signifies a shift in trend. Moving average isn’t just used as an exit indicator but also effectively indicates a buying opportunity. If you want to safeguard your profit, you can use a stop loss and place a moving average below it. If there is a shift in the price and it dips right below the number, the position will be closed automatically to prevent more losses.

Average True Range

This may not be a commonly used indicator but it is quite useful as it is effective in measuring the volatility when setting stops and limits according to the market behavior. Average True Range (ATR) needs a wide range of limit and stop. More volatility in the market means that the price movement can become more erratic. 

It is important not to set your range too narrow because if you do so, the position will be closed too early and you might incur losses in Forex. It is possible to use ATR on different time frames as it depends on the amount of time that you want to hold an open position.