Partial closing is a type of exit strategy in which the forex trader plans his trade exit in several increments instead of closing the entire position at once. This method is done by closing a portion of the total trade size as the trade becomes profitable and continues towards its profit target.

This technique allows traders to capture smaller profits faster while leaving the position open as the market moves further in their favor.

A major drawback of the partial closure method is an imbalance between risk and reward. When a trader employs the partial close strategy, the amount of profit made is rarely equal to the amount of risk taken when the trade is opened.

This method is commonly thought to reduce losses and increase profits, following the idea of ​​depositing your winnings. However, it has an unfortunate feature that has unpleasant effects on your earnings.

Consider a trader who trades 10 lots of currencies at a time and a stop loss of 40 pip. Your total initial risk on the position is 400 pips. If the trader partially closes half of his positions with a profit of 50 pips, he will have covered 250 pips of the initial 400 pips. The remaining position must be closed with a profit greater than 50 pips to maintain a risk / reward ratio of 1: 1.

Traders often compound the problem by moving their stop loss to breakeven after a partial close with profit. If your remaining position closes at breakeven, you have risked 400 pips to gain 250. If your next trade stops for the full 400 pips, you have a deficit of 150 pips to overcome on your next trade, assuming you are still there. trading 10 lots per trade.

The imbalance between risk and reward requires the forex trader who partially closes his trades to maintain a much higher success rate than traders who do not, because a single losing trade can erase the gains of multiple winners. This unbalanced relationship will force the forex trader to employ this partial closing strategy to achieve a high profit rate; otherwise, you will need to consider using this method as part of your business plan.

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