Automated Trading Exit Strategy can overcome the emotional trading problem. The typical human behavior in trading is cutting profits too short, and letting losses become too big. Automated exit strategies can be very useful in overcoming this emotional tendency. Using automated exit strategies will free a trader’s mind to pick great trade entries while their exits are unemotionally managed and their exit rules are perfectly executed.

All traders today have heard about the golden rule of trading, which is to cut your losses quickly and let your profits run. Even though we’ve all heard this sage wisdom, it’s been proven that the normal human behavior is to do just the opposite. Most traders want to ring the cash register as soon as they start getting into profits and will jump out of a winning trade too soon. On the other hand, most traders don’t want to be wrong about the trades they picked, so they will hold on to losing trades hoping they will turn around and be winners. In essence, the typical human behavior in trading is cutting profits too short and letting losses build up to be big ones. Obviously that’s a disaster for a trading account, but it’s why automated exit strategies can be very useful for any trader.

With automated exit strategies a trader can use his time and expertise in making more initial trade entries, and then letting an automated exit strategy take over the exit management. This accomplishes 2 things:

First, to be successful, traders must overcome the natural human tendency of holding their loosing trades. Good stop loss management is the risk management aspect that you need in order to overcome this emotional reaction. By putting a stop loss in place you will be protected against large movements from holding losing trades too long, resulting in excessively large losses. An automated exit strategy is unemotional and will perfectly execute your stop loss exit.

Secondly, the trader’s natural human tendency to take profits too quickly is a major problem that limits a trader’s success. This emotional reaction results in overly short holding times and small trading profits. By using an automated exit strategy, the exit management is non emotional and is carried out without cutting profits short. This frees the trader to be involved in making more entries while the exit process is elegantly handled for them.

To be a successful trader, you need to overcome the human tendency to make reactionary trading decisions. Automated exit strategies are a great tool for traders that have not yet conquered the emotional issues that come up while trading. Using an automated exit strategy will free your mind to pick great trade entries while your exits are logically managed following good exit management rules.