Why Letting Profits Run Can Sometimes Pay Off
Just as many forex traders are too slow to cut their losses, many are also too quick to close their trades to claim their profits when a trade does go their way. Closing a trade too early prevents you from taking full advantage when, for example, a major market shift occurs in your favor. How do you avoid missing out? First, you can use an analytical tool like average true range (ATR) to predict periods of volatility in the market before they occur. How to recognize this? One sign can be periods of unusually low volatility. These often precede big swings up or down in the price of an item. When this is the case, you can use trailing stops, an automatic stop-out order you set with your broker where the limit follows the price upwards, or you can cash out only partially as your profits mount.
A trading plan is only as good as the strategy behind it — explore Popular Forex Trading Strategies to find one that suits your style.
Top Tip: Learning when to let profits run takes planning, time, and experience — but is well worth doing
Ready to put your plan into practice? Open a free Exness demo account and trade with discipline before risking real money.
Frequently Asked Questions
Q: What is a forex trading plan and why do I need one?
A trading plan is a written set of rules that defines your strategy, risk management, and goals. It tells you when to enter, when to exit, and how much to risk per trade. Without a plan, trading becomes gambling. Even experienced traders follow a strict plan to stay disciplined and consistent.
Q: What should a forex trading plan include?
A complete trading plan covers your trading strategy, the currency pairs you trade, your timeframe, risk per trade (typically 1-2% of account), entry and exit rules, and how you will review your performance. The simpler and clearer the plan, the easier it is to follow consistently.
Q: What is a trailing stop and how does it protect profits?
A trailing stop is an automatic order that follows the price upward as your trade moves in profit. If the price reverses by a set amount, the trade closes automatically — locking in your gains. It lets you ride a trend without having to watch the screen constantly.
Q: What is the Average True Range (ATR) indicator?
ATR measures market volatility by calculating the average price range over a set number of periods. Traders use it to set realistic stop loss and take profit levels based on actual market conditions rather than guessing.
Q: Why do expert traders close positions partially?
Partial closing allows you to lock in some profit while keeping part of the trade open to capture further gains. For example, closing 50% at the first target and letting the rest run with a trailing stop is a professional technique to maximize profits while managing risk.
Q: How do I start building a forex trading plan?
Start with one strategy, define your risk management rules, and test everything on a demo account before going live. Open your free Exness demo account here and build your plan with real market conditions and zero risk.
Tags:
AUD, Brexit, Brexit, Banks, CAD, CHF, CNH. currency hedging, CZK, Donald Trump, EU EUR, forex trading, GBP, Global, Growth, Fears, Gold Prices, Government Shutdown, HKD, Is forex trading profitable, JPY Leverage, Mean Reversion, MXN, NOK, NZD, Passive income, popular strategies, Risk Management, RUB, Safe, haven currencies, second referendum, SEK SGD, Silver, Price, technical indicators, trading account, Trading Basics, trading psychology, Trailing Stop, trump wall, TRY USD, USD Price, Chart, XAG, XAU, ZAR,