Exiting a trade with a fixed profit target

In this method, the trader might say: "I plan to trade on a daily timeframe, and the market volatility for this timeframe is a minimum of 50 pips. Since I have commitments such as being employed and psychologically, I do not have the tolerance for trading under such conditions, I set a fixed profit target of 50 pips and a fixed stop loss of 50 pips. This model is the worst type of trade management and is generally not recommended except as a remedial solution."

When the stop loss is set, during the trade, we are not allowed to constantly adjust the stop loss to prevent it from being activated. This results in increasing our stop loss and moving further into the loss zone. Instead, we are only allowed to move our stop loss in the direction of tightening it, but not in a hasty manner that makes the stop loss so small that the price triggers the stop loss with a candle wick and then reverses, merely kicking us out of the trade.

Before entering a trade, the stop loss for the trade must be defined, even if the stop is wide and costly. However, in such conditions, we must evaluate whether, considering the trading plan, we are permitted to enter and with what volume. We aim to increase the probability of winning the trade to ensure success and profit from the market. Otherwise, if the goal is to enter trades at any time and place, then we could enter with a wider stop and smaller volume, but we do not increase our stop loss during the trade.

To profit from the market, we must consider the lowest probability of profit and assess it against our stop loss. That is, when the price starts moving from our entry point, we close part or all of the trade at the first level where there is a possibility of price reaction. We need to evaluate whether the stop loss is worth entering the trade given the trade costs. The stop loss should be considered the most pessimistic point where the price might move to and then return from.

Sometimes, as shown in the image below, after a strong upward move and a correction, an entry signal is issued and we enter the trade. The price moves and breaks its previous high, and we expect a new move to form with the accumulation of orders. However, if the price suddenly reverses and creates a candle with a long wick, we witness a lack of continuation. In such cases, we can exit the trade before the candle closes if the price drops below the open of the candle

Sometimes, it is observed that an upward move is initiated. These shadowy candles can play this role in the context of a trend, such that after this shadowy candle, the close of the next candle is higher than the close of the previous candle. However, when the price encounters a level of tension and a shadowy candle like the one in the image above is seen, it is a warning to exit. At the very least, there should be a bullish candle following this shadowy candle to confirm its role. The image below shows a lower timeframe, and the image above is from the higher timeframe.

Strict and Serious Implementation of Exit Strategy:

This means that we should not be lenient with ourselves or the market. We should not say to ourselves: "I see that there have been changes in the order flow in the market, but I will hold onto the trade," or "I won’t adjust the stop loss with the price movement." We must adhere strictly to these principles; otherwise, we will end up as the Persian proverb goes: "The looser you hold, the harder you fall."