Forex Trading Strategy: Top Exit Signals

ForexNewsNow | Published on September 29, 2011 at 3:00 am

ForexNewNow –  Although knowing when to enter the market is very important, exit strategies are also a vital part of the best forex trader strategies. Basically, once a trader has established a position in their online trading account, they need to know when to get out of it.

Some traders employ money management principles to exit a position. This typically involves the entry of stop loss and take profit orders at tolerable levels once a position is initiated.  This exit method does not require further analysis, and their online forex broker takes care of monitoring the market and executing whichever order is triggered first.

Nevertheless, forex traders use many other trade exit signals, and some of the top forex brokers even offer clients tools that provide trade exit signals. The following sections will discuss some additional ways traders can use top exit signals to achieve the best online trading results possible.

 

Top Exit Signals Using Technical Analysis

Quite a few retail forex traders like to use technical analysis to generate trade exit signals since access to real time pricing information via the Internet is widely available. Also, the sophisticated analytical software offerings of many forex trading brokers and independent developers provide ample scope for performing timely technical analysis.

One of the best forex trader exit signals to use once a trend following trade has been initiated involves waiting for a pair of short and longer term moving averages to cross. For example, a trader running a long position in a currency pair in an uptrend could wait to see the short term average cross below the longer term average to generate a sell exit signal. If they are running a short position in a down trend, an exit signal would be generated when the short term average crosses above the longer term average.

More conservative traders looking for confirmation from another indicator could use the Average Directional Index or ADX that provides useful information about trend strength. For example, a trader might close out their position after a moving average exit signal when the relevant ADX falls below the 20 level, indicating weakness in the former trend.

Swing traders use other exit signals often based on momentum indicators like the Relative Strength Index or RSI since they will both follow trends and also aim to profit from corrections. Such traders tend to exit their positions and reverse when the market’s momentum reaches extreme high or low levels indicated by RSI readings above 70 or below 30.

 

Top Exit Signals Using Fundamental Analysis

Fundamental forex traders might look for central bank monetary policy shifts to use as trade exit signals. For instance, a central bank might start to ease rates after having held them at high levels for some time. This might be an exit signal for a carry trader holding that nation’s currency against a currency with a lower interest rate to start to close out their investments in that country. Shorter term traders could also exit long positions held in their online trading account.

Fundamental forex traders also watch major economic numbers related to employment, economic growth or inflation for exit signals. When data comes out substantially worse than expected, that could be a signal to exit long positions in that nation’s currency held in their online trading account.

Most online forex trading brokers offer economic data calendars with release times, previous results, and the current forecast to assist clients in obtaining the necessary data to base their fundamental trade exit decisions on.

 

Top Exit Signals Using Automated Signal Generators or Services

Those forex traders who have yet to develop strong technical or fundamental analysis skills might prefer to use a signal service or automated trade signal generating software to provide trade exit signals.

Although the best forex trader practice would probably require a general understanding of how such signals work, they can be used as a means of confirming or negating a beginning trader’s market view to assist them in making better trade exit decisions for their online trading account.

 

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