The exchange term Locking is a strategic method of technical analysis that allows you to protect an incorrectly predicted transaction from further growth of the resulting loss.
The essence of forex locking is the opening of two oppositely directed positions that can mutually compensate each other.
Due to the implementation of such a technique, the price falls into a kind of “lock”, which begins to work in the interests of the trader.
To form an exchange “lock”, the following conditions must be met:
• The transaction must be made with one currency instrument.
• An additional position can only be opened in the opposite direction.
• Trading must be carried out within one account.
• Both positions must have equal volume.
The whole complexity of this method lies in the correct closing of activated orders. Consider the main tactical schemes that professional market representatives adhere to.
“Double profit” when locking on Forex
This is an ideal scenario that allows you to lock in profit on each of the active orders in turn. To implement this maneuver, you need to wait until the price goes positive in one of the directions. After that, the first order is closed. Further, the price should return to the starting point and start moving in the opposite direction. This will allow you to take the result of the second order.
Unfortunately, in practice, it is rather problematic to implement the idea of fixing double profits. The market is unpredictable and can change direction at any moment.
Profit by average difference
The idea of this trick only works in a well-defined market trend:
• One or two orders are added to the locked position, which are opened in the direction of the most probable price movement.
• When the cumulative result for all activated orders goes to zero or shows a positive trend, all positions are closed.
Here it is always important to remember that the greater the distance of the formed lock, the more difficult it is to profitably get out of the situation.
Loss on average difference
In this case, forex locking is implemented according to the previous algorithm, however, it implies that, despite all the additional orders, the loss remains uncovered for a long time. Therefore, instead of unpredictable expectations, the trader chooses to fix the current result with minimal losses for himself.
Forex trend pullbacks and locking
The implementation of this option involves covering the unprofitable difference in installments:
• A new order is added to the formed lock, opened in the direction of the current trend. Here it is important to take the maximum possible profit before the rollback.
• The action is repeated several times until the total recorded profit compensates for the initial loss.
news impulse
The essence of this approach is that at the time of the release of an important economic event, it is necessary to open an auxiliary order in the direction of its probable implementation. If the forecast is confirmed, then at one time it will be possible to cover or reduce to a minimum the entire negative difference in the trading account.
Forex position locking is a complex and psychologically exhausting technique, which is mostly used by experienced traders. If you want to replenish your arsenal with this insurance method, carefully rehearse all the actions on a demo account .
Do not forget that in addition to the proposed options, there may be other exit strategies from the formed log. Learn, experiment and hone your trading skills.