Too many traders take a one-card-trick approach to exits.
They place a profit target and hold on for dear life.
Instead, the smart trader plays the cards as they are dealt.
Think of it like this:
The trader’s first card is the equivalent of an Ace – The price goes quickly in the direction of their trade.
But the second card is a seven – The price stops and starts to consolidate.
The third card is a four. There is now a reversal pattern forming, indicating the trade might be about to turn – it’s now time to take some money off the table.
As Kenny Rogers said… you gotta know when to fold’em. Card sharks and smart traders are both getting ready to walk away at this point.
But it works the other way, too… You gotta know when to hold’em. A trader can never achieve truly exceptional profits until they are comfortable holding on to their winners.
If the price continues to go in the trader’s direction they might even add to their trade, just like a savvy card player might up the bet when they are dealt a good hand. You have to play your position, and that means adapting to market conditions on the fly.
This is the importance of being dynamic. If you set your exit point before you even place the trade, you’re going to feel hamstrung if the odds of your trade being successful change. Instead, if you play the cards as they are dealt, you’re going to remain in control no matter what the market throws at you.
Having this adaptive approach will save your bacon more often than not.
About the Author
Sam Eder is a currency trader and author of the Definitive Guide to Developing a Winning Forex Trading System and the Advanced Forex Course for Smart Traders (get free access). He is a co-owner of Forex Signal Provider FX Renew (Get a FREE 30-day trial). If you like Sam’s writing you can subscribe to his newsletter.