One of the areas where a lot of traders struggle is identifying when to exit the trade. Identifying the exit point needs to be close to accurate else you may suffer loosing a lot of pips either
by closing the trade prematurely or being too late. One of the straight forward way to exit a trade is by defining a limit price where the trade will close automatically. Nice approach! Nothing wrong with it. However there are some pros and cons with it.

PROS -

1. You are more or less assured that your trade will close when you want it to close. So, this approach frees from watching the trade all the time.

2. If analysis is done correctly, setting limits can help your trades emotion free, since it is your analysis that wll define the limit and you won't be tempted to become greedy.

CONS -

1. Thorough analysis is necessary to define the limits. Otherwise the trade may close either prematurely or beyond the optimum point. Both conditions are risky pip wise.

2. If the market reverses without meeting your limit and you are not watching your trade, that can hit your account very hard if you don't have appropriate stop loss in place.


As you could have deduced from above, there are certain timeframes where you can use the limit approach. Day trading timeframes (trading on 15 min., 30 min chart etc.) is one of them. But while trading on daily chart, you should monitor the trade and close it only when you see the sign of market reversal since you have to do the analysis only for limited time a day.

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