Surely you noticed that even if you have done a thorough analysis, there is often a last obstacle, a doubt that hinders the opening of the transaction? This obstacle is the question: “At what level should you install Take Profit in order to make a profit on Forex?”.
To answer this question, you need to understand what Take Profit is, and how to install it correctly.
Take Profit in the Forex market is an order made to close a position with a profit when a certain price level is reached. One could say that this is the opposite of Stop Loss, but it is much more pleasant: in fact, money is not actually made when the position is opened, but only at the moment of closing it with profit.
When you install Take Profit, the deal closes with a profit, even if you do not work in the terminal at this time, and you will be engaged in other matters. This is a very useful tool for those whose style of trading involves opening trades for a long time (many hours or days).
Now it is necessary to understand what such mastered exists in the Take Profit installation. Regardless of the trading strategy that you have chosen for yourself, the risk / reward ratio (loss / profit) should be at least 1 / 1.5. I will give an example from my own experience. If I opened a deal and placed a Stop Loss on 100 points, my Take Profit should give me at least 150 points or more to earn. Otherwise, trade can not be profitable!
If the loss / profit ratio is too low, a few loss-making trades are enough to cover all the profits from profitable trades. For example, if we assume that the risk / reward ratio is 1 / 0.5, then only one loss-making transaction is sufficient to reduce the profit from the two previous profitable trades to zero.
If there are two positions on the market, you can set Take Profit to different levels or put it only one position if the position is open on a trend. In the second position, you can leave Take Profit open and gradually move Stop Loss to the breakeven position. Entering the market in this way, you can earn significant amounts if the price is long enough and strongly moves in one direction.
It is very important to install Take Profit levels of support and resistance: if they are in close proximity to the price level, then Take Profit is better set up to them, as the price at these points can unfold. If the loss / profit ratio is 1 / 1.5, then it is better not to open such a transaction at all.
Let’s see more clearly in the figure.
If you look closely at the figure, you will see that if I had set Take Profit strictly according to the 1 / 1.5 principle, that is, at a price of 1.33800 (blue line), then my transaction would not bring me profit, because the price and I did not reach the mark at 1.3380 and, probably, I would have suffered a loss.
It was not immediately clear to me how to install Take Profit on Forex. Despite all efforts, even if I closed the deal with a profit, and there were more of them than unprofitable transactions, my account tended to decline. And only after I passed the training course with professional traders, I realized how important the risk / reward ratio is and how to install Take Profit to increase the percentage of profitability of my transactions.
If I could compare my shopping style of the past with the present, then I would say: who is satisfied with what he has, enjoys what he has, but those who are not satisfied – have more!