While the stop-loss/break-even stop-loss and take-profit are the exit points in most trades, there are other exit criteria that can help you exit before a market turn, and to protect your profit.
The supply and demand signals, as well as no-demand/no-supply signals that Analytical Trader draws, signal reversals in the market much more often than not, and so they’re the natural exit point. And the logic behind is simple: if supply is hitting the market, or if there isn’t buying pressure, why would you want to hold a long position? Taking the view of a pit trader (the traders who trade on the physical exchange): if you saw the other traders either placing large sell orders into the market, or if you didn’t see anyone really interested in buying, wouldn’t you do something about it? Most likely a reversal or a pause in the market would come, and so it’s best to exit and wait for another opportunity – maybe even in the same market, some bars afterwards.
Exit in 1 contrary signal (i.e. if long, exit if a VSA signal pops up above a candle)
If 20+ bars have passed without hitting take-profit (green dot), the trade should be closed.
Near a long-term resistance (solid lines), the market will often stall or even reverse, so you should close 1/2 of the position.
When important news come out, the market may move aggressively in one or both directions, so you should take this into consideration.
- Close any position on M30 and lower before important news shown on a forex calendar, like the Forex Factory calendar
- On interest rates announcements and committees, like FOMC, if there is an unexpected change in the rates, it’ll have a significant impact in the currencies up to the H4 timeframe, so avoid having open positions before those events
- If trading on the daily and weekly, the news lose their importance and very rarely will they move the market is a significant fashion unexpectedly