How Do You Let Winning Trades Run In The Markets?

In the forex market, depending on your trading strategy, there will always be trades that look like they have the potential to go much further than your initial take profit order level. Typically, these are trades we see when trading with the higher time frame bias/trend. They’re referred to as ‘runners’ – meaning you can leave these trades open to run for much longer than a normal trade. 

In this article, we are going to take a look at why you might want to consider leaving a runner in the market and how to do this. We’ll also examine the factors to consider, and the risks associated with trying to let winning trades run. So, let’s get into it!

The Benefits Of Letting Your Winning Trades Run In The Markets

The benefits of letting trades run primarily revolve around increased profits from a trade. All going well, leaving winning trades open for longer, to run, will allow you to bank a much nicer risk to reward ratio than planned from the trading setup. Many of our funded traders utilize this when the conditions are right in the markets!

Let’s take a look at a trade on USDJPY…  

If you tried to play a break and retest style trade here, targeting the high, you would have netted around a 1:1 risk to reward ratio with a sensible sized stop loss. This is great, but with the trend being so bullish, some traders will have allowed their trade to continue running for a while longer.  

Looking at the next support and resistance level on the H4 timeframe. By letting this winning trade run, it was possible to extend the target to 1:3, instead of 1:1. This would be tripling the profit you net in this trade.

Of course, it’s not as simple as this in practice, but this is the main benefit associated with letting winning trades run – increased profits!

How To Let Your Forex Trades Run

Letting your winning trades run can be broken down into a few fairly simple steps at the heart of it…

1. Your Trade Is Close To Take Profit

Your trade idea has to be relatively close to your initial take profit level for you to even be considering looking at letting the trade run into further profits.

2. Choose The Next Logical Reversal Area

 This needs to be your new take profit level. This can be done using Fibonacci, market structure, psychological levels or any other type of analysis you use for your trades.

 3. Adjust Your Take Profit To The New Area

Log into your trading platform of choice and manipulate your take profit to the new level.

4. Decide On Your Stop Loss Strategy

Are you going to move your stop loss to breakeven now? Or even move your stop loss into profit so you can lock in some profit from your trade? There are various options at your disposal to limit the risk you’re taking!

Factors To Consider When Letting Winning Trades Run

There are plenty of factors to consider when you’re letting winning trades run further in the markets. Many novice traders will overlook these factors and just try to ‘ride the wave’, which usually results in losses over the long term.

 These factors include:

•  Technical Picture – What does the technical analysis look like? How strong is the trend? Where is the trend likely to reverse? What is to the left of the charts? Do we have any deceleration indicating a pullback? This is something that needs to be heavily back tested.  
• Fundamental Picture – What does the fundamental analysis look like? Is this likely to be a small pullback or a larger move?
• Margin Requirements – Do you have other trading setups on the way and require the margin to avoid being over leveraged within your trading account? This is something that will be important for day traders to consider – especially those of you that are trading on prop firm trading accounts.
• Upcoming News – Are there any high-impact news events likely to influence the price of the currency pair you’re trading? This could be hugely detrimental to your profits from the trade, and this needs to be considered carefully.
• Risk Management – Can you afford for this trade to double back on you and take your stop loss level? Can you trail your take profit to lock in a certain amount of profit? If so, where would you look to lock in that profit?

The Drawbacks Of Letting Winning Trades Run

It’s not all sunshine and rainbows when it comes to letting winning trades run. In fact, there are often many risks associated with attempting this.  

• Firstly, you need to consider the fact that you may be wrong. If you’re wrong, the market will reverse against you and take your stop loss. This means you will be either breakeven or in a loss, from a trade that technically won according to your trading plan.  
• Secondly, you’re in the market for longer. This may not be directly negative, but you have to consider the fact that the longer you’re in an open position, the likelihood of news or any kind of factor that will affect price increases. This means that you’re essentially taking on additional risk by leaving your trades floating for longer.
• Thirdly, you need to have back tested a solid trading strategy for hundreds of trades to know where to hold your trades to. It’s not as simple as just holding winning trades if you’re trading with the trend – or all of your trades would be giant winners!

There is a lot more to test and consider, to understand exactly which trades are more likely to turn to runners, which to exit at the original take profit price and where to hold your running trades to. Are you working on fundamental analysis? Technical analysis? Exiting at a certain time?

There are so many variables to consider!

In Summary – How Do You Let Winning Trades Run In The Markets?

In conclusion, letting winning trades run for longer than originally anticipated can be a great way to increase profits in the market from your trading efforts. However, this should only be attempted if you have back tested a strategy to do so. For most retail traders, this will most likely cause detrimental results, rather than helping to increase your profits in the market – so this is something you should be aware of. Many of our Elite Trading Club traders have mastered this skill, but it takes a lot of back testing!

If you’re looking to become a prop firm funded trader, work with Lux Trading Firm now!