Techniques for Entry and Exit in Forex Trading

Bob Booker once made an excellent analogy. He compared forex trading to flying, saying the question is like asking a pilot whether takeoff or landing is more important. Most forex traders spend a significant amount of time searching for the best entry strategies, primarily looking for perfect convergence of indicators signaling a buy. Meanwhile, their exit strategies are often treated as an afterthought. However, this "afterthought" is precisely what distinguishes consistently profitable traders from those forever chasing better strategies.

When expert forex traders design their strategies, they devote equal attention to entry and exit. There are four main methods for entering or exiting trades:

1. Single Entry, Single Exit: The trader opens the entire position at one price level and closes it entirely at another.

2. Single Entry, Multiple Exits: The trader still enters the full position at one price but exits in stages at different levels. This strategy is often used to lock in profits while maximizing exposure to breakouts or trends.

3. Multiple Entries, Single Exit: The trader builds the position incrementally at different prices but exits all at once. This approach is commonly used by traders who "average down" (adding to a losing position to improve the average entry price) or "average up" (adding to a winning position as the trend continues).

4. Multiple Entries, Multiple Exits: The trader scales both in and out of positions. Trend traders frequently use this method, pyramiding into successful trades and exiting gradually to maximize gains.

Key Notes:

1. There are no absolute tops or bottoms in forex—only relative highs and lows. Markets are dynamic; today’s high could be tomorrow’s low, and vice versa. As long as the trend persists, any entry point can be justified and profitable.

2. Forex trading is a game of probabilities. The goal is to identify high-probability directions and enter where resistance is weakest. Like a car braking suddenly, price action has momentum. After a strong candlestick (bullish or bearish), the trend often continues. Your task is to find the path of least resistance.

3. Never trade without rationale, and always manage risk. Markets change rapidly. If a trend ends, avoid forcing trades. Stay patient and disciplined.