You are probably aware of the Forex maxim: 'cut your losses, but let your profits run' but do you know what it means and how to action it? If you can not design a trading strategy based on this powerful concept, then your chances of Forex success could be significantly reduced.
For instance, have you ever questioned yourself about why it is so hard to keep a winning position open? Why do you feel the need to consistently snatch at profits? This may be because you experience fear as soon as a good profit materializes that prompts you to close your position prematurely. For example, you may become nervous that a sudden price reversal could wipe out your hard-earned profits.
You may have also discovered that the feelings that arise from watching your profit mountain shrink can induce such nerve-racking emotions that they can have a long-term influence on the quality your trading decisions. If you have been unlucky enough to end a series of consequent losses, then you would have already suffered from the ensuing severe drops in confidence. From then on, you may have felt the need snatch at smaller profits before they have fully matured.
Consequently, if you have acquainted any good positions, you may have either snatch at an early profit or were stopped out though indecision. Even worse is that you then probably ignored in total frustration as price advanced in your initial direction producing serious missed profits.
You must realize that to evolve into a successful trader that you will have to know how to design and fully test a trading strategy as well as possessing the skills to manage risk. You must acknowledge that there are no instant secrets or magic wands associated with Forex trading. However, a good trading strategy will produce rewards if applied with diligence and consistency.
You may be interested to know that some traders think that the maxim 'let profits run' is not totally accurate. Obviously, if you are trading long trends then you will need to keep your positions open for as long as possible in order to secure the maximum profits.
However, other strategies close trades for other valid reasons such as after a pre-determined time period, eg a few days. Under such circumstances, such a strategy does not employ 'letting profits run' as an inherent central component. In addition, you must understand that many traders utilize targets as one of their main methods to secure profits. This is because this technique allows them to suppress their emotions during trading.
You must appreciate as well that if you do use a Forex strategy that has been designed primarily to trade large trends, then you must take measures to control emotions such as fear and greed that can have serious negative effects on the quality of your trading decisions.
As you can conclude from the above analysis, the concept of 'letting profits run' as many benefits but you must deploy it properly in order to achieve maximum benefits. You can achieve this objective by enhancing and tweaking your trading strategy and then fully testing the new updated version. You will need to repeat this process until you have honed in on your ultimate build.