One of the most common words you hear among FX traders is “chicken profit taking.” They are unable to avoid and overcome losses and immediately lock in profits. This is something that many traders actually do. So what kind of people tend to do chicken profit taking?
What is chicken profit eating?
Chicken profit taking means that as soon as an unrealized profit comes out after making an entry, it will be settled and profitable. This is of course correct in some situations, but in others it is incorrect. This is because there are times when you have to pull depending on the situation. For example, when aiming for a trend, you can aim for 50 pips or 100 pips, but if you take profit at about 5 pips in such a case, it is very wasteful.
On the other hand, in the case of a range market, this judgment is correct. A range market is just going back and forth in the same price range, so you can’t aim for a large price range. Therefore, it is never wrong to take profit at 5,10 pips. The tendency of those who do chicken profit eating is the following case.
beginner
Beginner traders are more likely to take chicken profits. If they have even a small unrealized gain, they want to take profits. However, on the other hand, if they have an unrealized loss, they somehow try to endure it. This is because they think it will come back in five days, but sometimes it doesn’t happen, so it’s dangerous. When these people enter the market, they become concerned and start without analyzing before and after, they look at the chart more than once, and then they immediately take profit taking action. They have a position, but they become concerned.
no trade rules
If you have no plan and no trade rules, you will often just enter without any thought. In that case, of course, you have no exit strategy, so you can’t see the goal and you close the trade immediately. You take profits when you feel good because you don’t want to lose. In many cases, you don’t have a necessary exit strategy. As a result, you can avoid losses at first and your margin will increase, but if you continue with each one, even if you lose a little, it’s easy to end up in the negative total.
too many lots
There are many cases where the lot size is too large and people take profits too quickly. This is because the price fluctuations are so large that people get scared and settle the trade immediately. This means that profits that should have been large end up being small. This is exactly the danger with the dollar and pound. If your technique is not at the top level, it is very dangerous. In order to avoid losing time, people check the time frame and take profits as soon as they see a positive result. Increasing leverage too much is also a problem. This is what happens when you trade without any basis or calculations.
unconfident
Traders who don’t win much lack confidence. Perhaps that’s why they can’t believe in themselves when they enter, and when they look at the chart, they get scared and tend to settle immediately. Nothing will change unless you decide on a rate standard as you continue. In order to make money without failing next time with your strategy, you need to change your way of thinking in a fluctuating market. The important thing is to decide on an exit rather than confirming a profit. Now, before you start operating, do some preparation. If the profit grows after you enter the market, you will take profits early.
How to overcome chicken profit eating
There are some ways to overcome chicken profit taking. Please try them out. Look at the long term instead of deciding on a short-term time frame such as 1 minute or 5 minute. Use tools to collect information such as economic conditions and winning rates, accumulate knowledge, and use indicators such as Bollinger bands and moving averages to develop a strategy. If you want to make money from foreign exchange in the short term, you basically need a strategy. You will also need to assess the situation, such as rising patterns, and train your mental and psychological abilities.
make a trail
There are cases where you don’t even have a set trading rule. When you enter, make sure to set your take profit and stop loss points. This should solve a lot of the problem, so you can often overcome it with just this. Once you understand a lot of things, you’ll be able to do it. First, I recommend that you try it as much as you can to win. By doing it every day, you can make a profit and improve your ability.
lower the lot
If you have increased the lot size too much, you may not be used to it, and even a slight price movement will scare you, and you will immediately settle and lock in your profits. In that case, first lower the lot size in MT4 or MT5. Even if you do increase the lot size, do not increase it suddenly, but gradually. Calculate how much it will cost before entering. Once you have learned and are able to win large price ranges, you can make a profit even if you lower the lot size.
don’t look at the chart
One of the tendencies and methods of people who always take chicken profits is to look at the charts in real time. By looking at the charts in real time every day, you can’t really trust yourself, and if the price goes against you even a little, you get scared and settle the position. If that’s the case, set up automatic settlement, set limit and stop orders, and leave them alone if possible. You’ll feel more relaxed, and the answer will be clear by tomorrow. It’s also a good way to learn about finance.
Awareness of the market environment
Look at today’s daily and weekly charts. You should set your target price range after recognizing whether today’s market is in a range or whether a trend is likely to emerge. If the range continues for a long time, it may break and the trend may emerge, and if the trend continues, it may soon become a range.
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