There can be any number of reasons why you took a certain position, be it that the market bounced off a support or resistance level, broke through a trading range or because you were reacting to global or economic news. Whatever the reason, it is important that you know why you entered the market. If you entered the market based on an opinion then, generally speaking, you are putting yourself at a greater risk as it is unlikely you are trading to a strategy. Once you have entered a trade you should already know when you will exit the market, be it with profit or having taken a loss.
The more conservative trader will look to trail the market to reduce the loss potential on the trade. However the risk here is that your stop is triggered before the market movement takes hold. A variation of this is to move the stop order into a position whereby if it is triggered the trade will have at least broken even (i.e. move it beyond your entry price).
Your exit strategy is not just limited to cutting a losing position, you need to have profit targets in place - this will help you ‘run your profits’. A conservative risk reward ratio is 3:1, this is where you would be willing to risk 10 pips in order to make 30 pips. You will never know if your target will definitely be reached but by having a strategy in place you will avoid cutting positions too soon if the market begins stumble before your predefined target.
