The importance of take profit and stop loss orders

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The Forex market behaves differently from other markets.  The very nature of speed and instability coupled with its enormous size differentiates it from any other financial market in the world. While this very nature of the market acts as a magnet for the risk takers and the investors, it is also important to realize that the market is totally uncontrollable.  It isn’t something ruled by a single individual, event or factors, but just like any other speculative business, the risk that it entails chances for a higher profit and loss.

A lot of times, forex profits can come quickly, but more often than not it requires a lot of patience and planning. Setting a take profit order for an easy target on a daily chart is one way to play this trade. One can also look at the daily chart over a wide range of days and look for the next support resistance area to set a take profit. One can also set trailing stop that will lock on profits as the trade progresses. Setting the stop loss is vital as it will limit losses if the market does not move in the preferred direction. Setting the take profit level will make sure that the trade exits in profit once the market makes the downward move. It can be an advantage to set these levels when placing the trade orders because once the trade is actually in the market; the pressure can make it difficult to make decisions.

Limit orders, also known as profit take orders, allow traders to exit the market at pre-determined profit targets. Limit orders help create a disciplined trading methodology and make it possible for traders to make decisions without continuously monitoring the market. Patience and planning can bear profitable fruits in forex trade.

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