This article will explain and show you how to lock profit in forex on the MT4 & MT5 trading platforms. It has been created with the aim of helping you understand some of the critical features of the trading platform and the benefits of locking in profit while trading forex.
The technique that will be presented here can make your trading more successful, by help to eliminate trading losses and maximize your potential to profit.
So without any further delay, lets get started.
How to lock profit in forex manually or with a trailing stop loss
When a beginner starts learning about forex trading, one of the first things they discover is the stop loss and what it is used for.
What is a stop loss?
It is pretty self explanatory, a stop loss stops losses beyond a certain point. It is an order to close a deal or trade at a predetermined price in the case of adverse price movements. Like a safety net, it gets triggered by price movements against the direction of your trade.
All forex trading platforms include this feature and it is indispensable for helping you to minimize risk. It can also be used to lock profits in as the price moves in the direction of your trade.
What is locking in profit and what does it mean?
Locking in profit means that you can secure the accumulated profits of a trade without risking them further. In other words, you protect the profits from any kind of loss due to adverse price movements.
The result is to secure the money that you have already made on the trade while leaving the trade open to potentially accumulate more.
Now that you know what a stop loss is, and what locking in profit means, lets look at how to lock profit in forex.
How to lock profit in forex using a stop loss
Traders are always on the lookout for ways to improve their success rate, profit potential and to avoid situations where they lose more than intended.
A stop loss can help with all of these and these are the steps required to placing one and how to lock profit in forex with it.
Step 1: Open a forex trade, either buy or sell
Choose whether you want to buy or sell a currency pair and open your forex trade.
Step 2. Set a stop loss or a trailing stop loss
A stop loss is a predetermined price or distance in pips from your entry price that you will exit the trade if it moves against you. For example, if your entry price for a buy is 1.3500 and you set your stop loss at 1.3480 (20 pips below the entry), you would exit the trade if the price dropped to 1.3480.
You can set a stop loss at the time of placing the order to buy or sell. Alternatively, you can right-click on the open deal and select modify, afterwords.
A trailing stop loss follows the price as it moves in your favor, to lock profit in, and only closes your trade if price moves against you by a certain amount of pips. You might set a trailing stop loss at 20 pips, for example. So when the price moves 20 pips in your favor, the trailing stop loss will also move up by 20 pips.
To set a trailing stop loss on the MT4 or MT5 trading platforms, right-click on the open deal in the terminal. Then select trailing stop from the pop-up menu that appears. The distance is measured in points, ten points is equal to one pip. Furthermore, the platform must remain open for the trailing stop loss feature to work.
Step 3. Let the trade run
So, you now should have a trade with a stop loss placed for it. The next step is to let the trade run. If you placed a trailing stop loss, the platform will lock profit in automatically.
As the price keeps moving in your favor, for every 20 pips, the stop loss will trail by 20 pips and lock profit in. Until the price moves back 20 pips, triggering the stop loss to close the deal. We are just using 20 pips for this example, but you can place a trailing stop loss for any number of pips.
Step 4. Manually adjust the stop loss as the trade moves in to profit
Locking profit is a good technique to use when the market has strong momentum and is trending. It is also a very easy and simple trade management solution that can be used by any trader.
If you prefer to be more dynamic and manually adjust the stop loss as the price moves in your favor, you can. All you have to do is modify your deal by updating the stop loss.
And that is how to lock profit in forex.
What are the benefits of locking in profits?
Locking in profits is an essential aspect of forex trading. For many traders, knowing how to lock profit in is more important than the trade entry itself. The exit is more important than the entry, this is what determines whether you make a profit or a loss and how much.
Successful traders will often say that they don’t have any fixed targets or goals when it comes to their trading. Instead, they tend to think more about trade management and how they can secure profitable trades, maximize profit potential and minimize risk.
The only way to do this is by using a stop loss and by locking in profits. By doing so, you are safeguarding your account from market volatility, and ensuring that you make a profit on those trades that show you some.