I have just recently started trading forex using divergence method. Basically i look for divergence between price and an indicator (stochastic) and I have had some success. I always find it very difficult to know when to take my profit and very often I seem to close the trade far too early leaving lots of pips on the table. Can anybody give me some advice as to when to exit trades ?
Many thanks
Didier
Build a time machine so you don’t have to worry about it. Ok but seriously, exiting out of trades is what actually makes a trader.
Hi there,
It sounds like you are looking for a fixed number of pips per trade? Although I wouldn’t recommend a fixed TP everytime, it would depend on your timeframe and trading style. Are a swing trader or a daytrader? A swing trade may be looking for a 100+ pip gain at times, while a day trade may only look for 20 pips from the market. Also, if you’re looking for divergence setups, make sure you can minimize risk, which I believe you can. 1:2 RRR would be ideal I think.
What Viper5 suggested is also good I think; a time machine would be excellent! 
But jokes aside, it just takes experience. You could try backtesting to find good pip objectives too.
I’m still a noobie in Forex so I’m sure I could be mistaken. I’m just talking from my limited experience and knowledge. Hope it helped.
Clark.
Very helpful. Thank you so much
On a long trade, exit when the buyers stop buying, on a short exit when the sellers stop selling - Simples.
That is correct.
But how you will know the buyers stopped buying or sellers stopped selling, i think, is chupeau’s next question.
That really clarifies things.
When price goes up and volume increases, it means there are mostly buyers, when price goes down and volume increases it means there are mostly sellers.
surely the total number of lots sold over a given period must equal the number of lot bought during the same period.
if price is going up, its just that buyers are prepared to pay a higher price, and they continue buying no matter how much price is rising
yes, it’s same difference really, supply and demand, have a look at the VSA threads.
make sense.
i believe exiting a trade is a very important trading skill to learn.
i’m having some confusion on it myself.
purplepatch: thanks for mentioning ‘vsa’ - i will check it out.
It depends entirely on your strategy. You will find, over time, that you develop a feel for what is the best way to exit in line with your strategy. There are really too many variables specific to your situation for us to give better than generic advice. For instance, you need to look at the percentage of winners you expect to take according to your strategy. Some strategies rely on needing only a few winners (say, 10% or fewer of trades being winners, the rest being losers). In this case, you would need to let the profits run a long way on the winners to make the strategy work, and would need to tailor an exit strategy to make that work.
But if your strategy generally gives around, say, a 70% win ratio, then 1:1 R:R is plenty for your strategy to have you making money. So you could, in this example, trail your Stop up to lock in profit at 1:1 once price moves a set number of pips through 1:1, then at that point you have locked in what you need to be nicely profitable, but are still letting trades run, so some of your trades might become 2:1, 3:1, etc.
Some traders use pure Price Action to run their strategy, so look for one of a few specific candlestick patterns to form as their indicator that price is about to move against them, so use that as their exit indicator, regardless of where profit is at that point.
So in each of those three examples - and I know that there are many more - the trigger for exiting the trade is entirely different (okay, I know that you could apply PA to reinforce the first two examples, but you know what I mean), yet all three work, there are successful traders using a range of different exit criteria, yet they are equally successful. So it is a cliché, but you need to find your style, your trading personality, and then your exit strategy will flow from that. That should just come naturally with time.
Apologies if this sounds at all patronizing, it is not intended to be - this is a subject I grappled with when new, so thought I might have a helpful perspective to add!
I always try set my target profit and stop loss as I open the position, so I don’t have to worry about it any more…
I know it still leaves the question open though…
Many thanks indeed for your very comprehensive explanation. I am really grateful. I took on board your wise words and I think I have found an exit strategy that totally fits my style of trading. I am purely a technical trader and this suits me because I like charts and indicators to tell me what to do i.e. when to enter a trade, where to place stops.
I have experimented all of last week with using SAR indicator as indication of when to exit. I twicked the settings to match the time frame I trade from and the results are, I think very encouraging and more importantly it tells me precisely when to exit. I don’t have to think anymore great !!!
In the last 5 trading days, I have had 10 winning trades with an average of 51.6 pips,9 losing trades with an average loss of 16.9 pips. This gave me a net result after spread cost( I am a spreadbetter) of just over 300 pips. I think if I can achieve this consistently it will make money.
Any comments please feel free and once again thanks you very much for your help.
Didier
Watch it till you can put on a trailing stop. Once your trailer kicks in, let it run. Otherwise, standard stops hold ya safe.