What Is Profit Taking Forex?

Profit Taking is usually done by traders if there is data or information on market drivers that will be, is being or has been released. By doing Profit Taking, traders expect more profit than the situation in general. In addition to taking advantage, Profit Taking can also be done to lock in the advantages of forex trading owned.

Profit Taking is actually the term stock trading, which is used to explain investors' sell actions to lock in profits. But because in forex, trading positions can be easier to do in two directions, forex profit can mean selling actions to close long positions, or closing sell orders with buy actions.

Hearing the words of the benefits embedded in Profit Taking, of course all want to do it right? As a trader, you can also profit taking Forex if at all possible. But keep in mind also that Profit Taking still requires carefulness and caution. Before the rush to do Profit Taking forex, let's first study when it's the right time to do it.

Profit Taking Forex

When is the Time to Profit Taking Forex?

There are a number of moments that traders are waiting for to do Profit Taking. The following is the right moment to take Profit Taking Forex:

1. When Changing Trends Occur

Recognizing trends that occur in the market is one of the keys to success in forex trading. For example, you put a Buy position because you see price trends tend to rise. Not long ago, the price trend reversed. You also close the Buy position to lock in the profits that have been obtained.

You can use the Moving Average indicator to get a signal of changing price trends. For a clearer example, consider the picture below:
Moving Average

In the picture of EUR/USD (Time Frame 1 Hour) above, we put the MA indicator 9. When the price candle rises cuts the MA line towards the top, we open a Buy position at the price of 114600. After a while, the price continues to move up. When the price movement turns down to cut the MA line down, it means that the trend will move down and it's time to secure the profits obtained from the Buy position.

If calculated from the difference between the Entry Buy price and the Exit above, then the profit is equal to:
1.15287 - 1.14600 = 0.00687 (68.7 pips)

2. When There Is a Release News High Impact

Traders based on fundamental analysis will look forward to macroeconomic data, because price movements can reach tens or even hundreds of pips around the release of the data. It's fantastic, isn't it?

To take Profit Taking action based on economic data releases, a trader needs to read a lot of information. However, be careful. Too much reading of information can also cause confusion and Over-Analyzed. To find out what economic data tends to be considered important by the market, you can pay attention to high-impact data in Forex Calendar. Besides that, you also should routinely follow forex news to listen to the influence of market sentiment that is dominating price movements.

The reason why traders and investors are already reliable in taking Profit Taking actions is to secure the profits they get. For example, if the Fed's speech is Dovish, investors will tend to shift their capital to assets other than USD, causing the US Dollar to weaken. Observing this, other traders who have Buy Dollar positions will also be triggered to do Profit Traking, in order to secure profits before the value of the Greenback drops deeper.

Major events such as war, acts of terrorism or geopolitical conflicts, can also affect the value of a currency. For example, when the trade conflict between the US-China heats up again, then a variety of major currencies including the Dollar will fluctuate. The forex market is ready to anticipate various possibilities that could threaten stability, given that the US and China are the two countries with the largest economies in the world. Often, many traders take the Profit Taking action to secure the benefits already gained, because in such a precarious situation, unexpected market turmoil can bring huge losses if they are misplaced.

How to Profit Taking Forex

1. Automatically Using Take Profit

Take Profit (TP) is one of the features contained in a trading platform and means the limit of the profit you want to take, while the Profit Taking is an action. Thus, it can be said that Take Profit is a tool that can be used to take action on Profit Taking forex.

The Take Profit menu can be used to secure profits in preparation for trading. So, you can target Take Profit levels even before the Order Entry is executed. Determination of Take Profit level can be adjusted with technical setup, Risk / Reward Ratio rules, or a combination of both.

2. Manually

In addition to using TP to do Profit Taking forex automatically, you can also close the trading position that is currently open manually. The trick is to keep an eye on the price movements that are going on, then do an Exit Trade when the price movement signal indicates a change in direction of the trend.

In addition, you can also look for a Profit Taking point when the trend is still ongoing, to secure the profits that have been collected. This technique is most effective when the market is trending and experiencing pullback at certain points. Here, you can use the Moving Average indicator to look for Exit Points on the Pullback. For example, consider the illustration below:

Manually Taking Forex

In the chart above, the price of several attempts to go up through the EMA, but shortly afterwards it always drops again below the trend line. In the end, Downtrend is confirmed again after the last break of the EMA price is marked by several bearish candles at the same time. If you open a sell position at the beginning of the Downtrend (marked in the red box), then Profit Taking can be done when the price re-tests the EMA 20 limit.

Profit Taking action is not only done by forex traders, but also traders and investors in other asset markets. If you are interested in studying forex correlation with other markets, then you can visit the article about the importance of intermarket analysis in forex trading.
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