Implementing targets can contribute to consistent trading practices and be a vital element of a comprehensive trading plan. In contrast to the implementation of a concrete profit target, evaluating market behavior on the fly is a much more subjective exercise. Many factors contribute to the potential for an extended or truncated move in price and the eventual profitability of a trade:.

Perhaps the most challenging aspect of futures trading is the act of closing out a positive position. Whether you implement concrete profit targets or rely on intuition to provide cues for your market exits, consistency is the key. Achieving longevity in the marketplace requires practicing sound judgment while avoiding the many pitfalls of futures trading.

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Sign up for a day trial to Market Action Scanner! Register Now. Skip to primary navigation Skip to main content Skip to footer The current futures marketplace is a dynamic environment, featuring substantial and rapid swings in asset pricing. Although traders have a vast array of philosophies and approaches to closing out winning trades, there are only two primary reasons for exiting a winner: when a trader achieves a predetermined profit target when a trader observes confirmation of changing market conditions Profit Targets Profit targets are a common method of exiting a trade in positive territory.

Developing the optimal profit target for a given trade can be a considerable undertaking, with several concerns that need to be addressed: Risk vs. Reward: Identifying an acceptable risk-versus-reward scenario is an integral part of setting profit targets. In futures, assumed risk varies according to contract specifications and the degree of volatility present in the market being traded.

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Although the utility of a RRR is frequently debated within trading circles, they remain a popular method of determining profit targets. Trading Methodology: Trading style is a critical part of profit target development. If a trader is scalping liquid futures contracts using a short time horizon, profit targets will be much tighter than practitioners of a swing or day-trading approach.

Ultimately, market exit depends on the style and methodology of the trading operation. Support and Resistance Levels: Traders may use technical analysis or fundamental analysis — or a convergence of both — to determine optimal profit targets. Fibonacci extensions, Bollinger Bands, pivot points and moving averages are a few tools that traders use to identify areas of support and resistance. Support and resistance can also be used to exit using take-profit. They are prominent price areas that can serve as targets to exit. Overall, by setting stop-loss and take-profit orders, you may stop monitoring your positions — eventually, either stop-loss or take-profit will be triggered.

This exit strategy is suitable for longer-term traders.

It implies that you look for a trend weakness to establish an exit point. To identify such a point, traders use moving averages, double top or bottom chart patterns, prior swing lows or the Ichimoku cloud indicator. Exiting on the trend weakness has a clear disadvantage. A trader risks leaving a trade on a weak low before the trend bounces back. Frustration at losing the potential profit is followed by beating yourself up. This exit strategy suggests that you should get out of a winning trade once the reason for an entry has disappeared.

This indicates an uptrend, so you decide to go long. In a while, the price of asset X demonstrates a lower swing high and lower swing low. You may enter a long trade following a bullish indicator. When the indicator no longer confirms your long position, you give it up and leave the trade.

The drawback of this trading exit strategy is its subjective nature. Such things tell that the reason to enter has vanished. Spread betting TradingView. Indices Forex Commodities Cryptocurrencies. For traders. News and features Capital. Professional clients Institutional Economic calendar Capital. Learn to trade. Why Capital. Our Global Offices Is Capital. Get the app. Log In Trade Now. My account. Common exit strategies in trading. For traders News and features Features Common exit strategies in trading.

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Stop-loss and take-profit Exit strategies in trading set out reasons for leaving a trade and involve placing stop-loss and take-profit orders to exit. Multiple take-profit levels 1. Take-profit halfway Using this exit strategy method, you have to lock in half of your trading position when the price has crossed a halfway point in your direction. Risk reward When it comes to exit strategies, another important factor to keep in mind is risk-reward ratio RRR.

Risk tolerance Risk tolerance is your ability to handle a loss. Open a trading account in less than 3 min Create account.

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