Forex Trade Management For High Profitability (Part 2)

For the second part of how to manage your forex trade for profitability, I have two additional suggestions for you to follow if you want to secure profits for your trading. These two suggestions are still in relation to the two suggestions that I have told you about in part one of my article. In this part, I will again suggest two things that you should do. First, how to effectively put stops in an uptrend to trap profits and second, how to correctly put stops in a downtrend to preclude losses and gain profits.

First suggestion: Putting stops when prices are going up in your favor to harvest profits.
Elevating your stops to every swing low would be the correct procedure if you are in a long position and you are now well aware that the price is moving favorably to your side. If you still are not too well versed as to what a swing low means, it is simply the lowest price level in the middle of two high prices and you can usually have this situation obtaining in a retracement.

To illustrate, let us say that you entered a forex trade at 118 and after which the price went to a high of 150 pips to 119.50 and then reverted back down 50 pips to 119.00. The first swing high would now be 119.50. Upon reaching a low of 119, the price again move upward to another high of 120. This would now represent your second swing high of 120.00. Since the price swing of 119.00 is your lowest swing between the first high swing of 119.50 and the second high swing of 120.00, then 119 will be the swing low in this example.

This illustration will have you put your stops just several points below swing low of 119.00. Thus, if the price would dip down and cut you out, you still will have a profit of 100 pips. But if the price still runs in your favor and continue its upward swing, just continue adjusting your stops by elevating it to every swing low. This method will assure you of a big profit harvest if the price continues its upward swing, and will guarantee that your early gains will not be affected once the price movement turned sour and goes down, cutting you out.

Second suggestion: Putting stops in a downtrend.

In a downtrend where your position is short, putting stops in a downtrend is simply the reverse of putting stops in an uptrend. In putting your stops in an uptrend, you put them on the swing low between two swings high. In a downtrend, you put your stops in the swing high in the middle of two swings low. You will continue adjusting your stops by placing them lower for every swing high.

Place your stop several points above the swing high together with your spread. If the price continues to drop in your favor, wait for the price to revert back or to retrace itself and if it continues to go down, adjust again your stops plus your spread to the new swing high. If the slide continues in your favor, adjust your stop and spread to every new swing high. The stop will enable you to accumulate profit while preventing loss if the trend goes the other way around. This is the excitement in forex trade that you will learn along the way.