Forex Trading Basics: Locking Positions

In gold trading, locking positions is divided into two types: loss-locking and profit-locking. However, locking positions is generally not recommended—setting strict stop-losses or timely profit-taking is preferable. Improper handling can turn small losses into significant ones. Below is a detailed explanation of both methods.

1. Loss-Locking

Why Lock Losses?
If you strictly adhere to stop-losses, locking is unnecessary. It’s typically used in these scenarios:

• When the market trend becomes unclear, making direction hard to judge;

• When no stop-loss was set, and losses have grown too large to close, locking prevents further damage or margin calls.
  Note: After locking, always set a stop-loss (2-3 pips higher) for the opposite position to avoid premature liquidation during volatility.

How to Unlock?
Unlocking requires closing both positions at the right time. Holding locked positions indefinitely incurs swap fees and disrupts future trades.

Key factors for unlocking:

• Price Level: Ideal at breakout points;

• Timing: Wait for a clear trend direction.
  For beginners, two practical methods exist:

• Method 1: Close the counter-trend position first (cutting losses), then hold the trending position until the trend weakens;

• Method 2: Close the profitable position first, waiting for a pullback/reversal to close the other (requires precise timing, or it may turn into a long-term trade).

2. Profit-Locking

Profit-locking functions similarly to loss-locking, except the locked position is profitable. It’s better to take profits or use trailing stops instead, as locking adds complexity.
Unlocking principles mirror loss-locking:

• Aim to maximize gains or minimize losses;

• Less psychological pressure but still demands careful timing.

Remember: Reducing losses equals increasing profits—prioritize discipline over locking positions.