Trading Strategies

What is Take Profit?

Take Profit is an automated order you set so that your particular currency position if it reaches a certain level of profit will be automatically closed. This way you ensure yourself a profit. The downside to the Take Profit is that sometimes you get in on the ground floor of an especially profitable trend that continues long after you’ve exited and you accidentally deprive yourself of an even more profitable trade.

Take Profit orders mean that you are able to take advantage of any profits before the rate falls again and your profit reduces, without constantly monitoring your trades.

Take Profit and Stop Loss Orders are crucial tools in enabling you to professionally manage your trades. Where you set these orders depends on your level of risk, but it is good practice to use them with every trade you make.

Management of positions and your investment is key to successful Forex trading.
 

What is Stop Loss?

Whether you are trading Forex, Commodities, Indices or Stocks you can always pre-define your market exposure. Say you are trading USD/JPY. In the case of USD/JPY, you can set an automated instruction that will pull you out of the market if the market moves against you.

NOTE: Under abnormal market conditions, CFDs may fluctuate rapidly to reflect unforeseeable events that cannot be controlled either by the Firm or you. As a result your stop loss instructions might not be executed at the declared price(negative slippage might apply) hence a “stop loss” order cannot guarantee to limit losses during abnormal market conditions.

Even if after you bought USD/JPY it suddenly drops +800 pips you can set a stop loss of just 25 pips. Unlike what you may have thought before, trading the market using a stop loss can be a great technique of protecting your investment. Likewise, there is also an automated feature called ‘Take Profit.’ This automated order allows you to set a target for your trade. If you bought USD/JPY at 94.50 for example you can set 95.40 as your ‘Take Profit.’

When the price reaches your take profit, the trade will close automatically and the profit will be booked and added to your balance. These orders will remain active even if you are offline. You can place your trades, set a stop loss and take profit and continue with your day. Using 24FX mobile platform you can monitor as well as close and open trades via your mobile phone.

  • A stop loss allows the trader to predetermine the risk to the market
  • Take profit will ensue the trade will automatically close when your targeted price is obtained
  • Closing and opening trades can be done through 24FX mobile platform
  • Both stop loss and take profits are optional

Carry Trading, Long-Term Investments

In the Forex market, experienced traders take advantage of the interest rate differentials in order to profit over the long-term. Forex traders make note of the current interest rate of the base currency and ensure it is significantly higher than the secondary currency. Let's break it down and understand how carry trading works in the Forex market. We will take AUD/JPY as an example.

The interest rate in Australia is significantly higher than the current interest rate in Japan. If a trader buys AUD/JPY, he will pay interest for selling JPY but benefit from a high interest by holding AUD. Because the interest rate in Australia is higher the trader will enjoy high interest on the trade, which he will be paid for on a daily basis during the rollover.

Such a trade can be held onto for an unlimited period of time, as long as there is enough capital to sustain the open trade. AUD is seen as one of the favorite currencies to carry trade due to its relatively tight spreads and volatility. If you are considering to carry trade, calculate how much interest you are expected to receive and monitor the rates of both Australia and Japan.

Traders may also focus on key economic figures from Australia and Japan such as unemployment rates to ensure they are entering the carry trade at the right time.

  • Carry trading is used for long-term investments
  • Carry traders will look to profit over the interest rate differentials
  • Carry trading can be exercised for an unlimited period of time
  • AUD is the favorite currency for carry trading.