Many traders exit a trade without a strategy in place. More often than not, the decision to exit is determined by emotions of the trader. Emotions of fear and greed. Decisions made by fear and greed are not only inconsistent, but many times seem to lead to an exit at the worst possible moment. The best way to keep our emotions out is to have a sound strategy.
Many experienced traders follow a simple risk-to-reward ratio as an exit strategy. A risk-to-reward ratio of 1:2 allows the trader to place a target that is twice the risk. For example, Trader A place a EUR/USD long @1.4500 with a S/L @1.4400 or 100 pips, He would place his T/P @1.4700 or 200 pips.
Many experienced traders follow a simple risk-to-reward ratio as an exit strategy. A risk-to-reward ratio of 1:2 allows the trader to place a target that is twice the risk. For example, Trader A place a EUR/USD long @1.4500 with a S/L @1.4400 or 100 pips, He would place his T/P @1.4700 or 200 pips.
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