Set n’ Forget vs. Profit Taking

Filed under: Learn Forex Trading |

 The jury really is out on whether forex traders are better advised to leave their trades in a “set and forget” type style, or to take profits as the trade moves in their favour.


On the one hand, you could put an order in for a trade with a hard stop loss and a automated profit target, and then just let the trade run until it either hits your stop or hits your profit target. Some argue that you have to let the market play out in order for your edge to be realized in the form of profits. They say that if you don’t give the market room to ‘breathe’, then your trading edge will not be an edge at all and you might even make a loss.


On the other hand, there are many who think that this kind of set and forget style strategy is naïve and that one should protect your bank at all times via a number of strategies. For example, you could manually move your stop to break even once your trade start to move in your favour, say by the same distance as your risk. This would essentially give you a free trade. Or, you could take half of your profits at one or two times your risk and move the other half to breakeven, thus locking in some profits and letting the other half run for a free trade. One final thing you could do is set an automated trailing stop, which puts you at breakeven once the trade is a specified number of pips in your favour, and then stops you out if the trade moves against you at any time for that specified number of pips.


What we really need is for some research to be done so that we know which of these methods is more likely to produce profits in the long run, but unfortunately, there are very few (if any?) empirical studies out there on such topics. All we can do is test these things out for ourselves, and make a call on which method to take.

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