Currently, there is a lot of information circulating about entry points in Forex trading. Many people may feel confident about their entry strategies. However, there is not much information available regarding the timing for selling. Many traders may find themselves wondering when to sell after entering a position.

In this article, I will explain the “timing for selling in Forex” to help resolve this issue. I will introduce methods for making judgments using candlestick charts and technical analysis, so please use this as a reference.

Timing to Use “Sell” in Forex

The timing for using “sell” in Forex consists of two key moments: when entering a trade and when closing a position. Regardless of the situation, the action of selling is very important, so it’s essential to understand both. Here, I will explain the details of when to use “sell” in Forex.

When Entering a Trade

To trade in Forex, you must first enter a position. At this time, many people tend to buy the target currency pair. This is the basic trading method in Forex; however, you can also enter a trade by selling first. This is called short selling, and you can profit through the following mechanism:

1. Select the target currency pair and place a sell order first.
2. Wait for the price of the currency pair to decrease.
3. When the price drops, place a buy order to close the short position.
4. The difference becomes your profit.

The idea is to sell at a high price and buy back at a lower price. While this may be difficult to visualize in everyday life, in Forex, you can aim for profits even by entering with a sell order.

When Closing a Position

If you enter a trade and your prediction is correct, you will likely see a positive profit. However, this is called an unrealized profit, meaning it is still a tentative gain. To turn this profit into a realized one, you need to time your exit correctly. At this point, you will use a sell order. The difference that arises when you sell at the optimal timing after purchasing the currency pair will be your profit.

Sell orders are not only used to secure profits but also when cutting losses. They are also used when managing positions. Generally, the timing of entry is emphasized in Forex, but the act of selling is also frequently utilized, so please pay attention to this aspect as well.

The Importance of Timing to Sell in Forex

Some professional traders argue that the timing to sell is more important than the timing to buy in Forex, as it can increase the potential for profit. Additionally, selling can help minimize losses. Here, I will explain the importance of timing when selling.

To Increase the Potential for Profit

For example, let’s say you purchased USD/JPY at 100 yen. If you do not have a grasp on the timing to sell, you will have to make decisions based on intuition, which could lead to missing out on potential profits. However, if you understand the timing to sell, you can secure your profits effectively, increasing your chances of earning more than those who rely on intuition for their exits.

While you may not feel much difference when trading with small lot sizes, as your lot size increases, you will start to notice a significant difference in the amount of profit you can earn. For some, the profit can vary from a few hundred dollars to a few thousand dollars. To minimize this opportunity loss, it is essential to understand the appropriate timing to sell.

To Minimize Losses

In Forex, the focus is often on how to make profits. Many sources of information, such as websites and books, emphasize methods for earning profits. However, to continue winning in Forex over the long term, it is also necessary to learn how to minimize losses.

To minimize losses, understanding the appropriate timing to sell is crucial. If you can accurately identify when a trend is about to change or when the market flow shifts, you can sell the currency pair early, thereby limiting your losses. If your losses are minimal, it is relatively easy to recover, so there is no need to worry.

How to Determine the Timing to Sell Using Candlestick Charts in Forex

In Forex, the necessary timing to sell can be determined using two methods: candlestick patterns and technical analysis. First, I will introduce how to judge the timing to sell by looking at candlestick patterns. Beginners in Forex should use the following candlestick patterns—Bullish Engulfing Candle, Bearish Engulfing Candle, Upper Shadow Bullish Candle, and Upper Shadow Bearish Candle—to determine their selling timing.

Bullish Engulfing Candle

In Forex, a bullish candle appears when the closing price is higher than the opening price. A Bullish Engulfing Candle is a bullish candle with a larger body than the previous bullish candle. Depending on the Forex exchange you use, it is generally displayed in red.

A Bullish Engulfing Candle indicates that buying pressure is very strong. It is also referred to as a buying signal, and when multiple Bullish Engulfing Candles appear, more traders tend to buy or add to their positions in a specific currency pair. The chart is expected to rise, so those who entered with a short position should place a stop-loss order when multiple Bullish Engulfing Candles appear.

Bearish Engulfing Candle

A Bearish Engulfing Candle appears when the closing price is lower than the opening price. This is characterized by a larger body than the previous bearish candle. Depending on the Forex exchange you use, it is often displayed in blue.

A Bearish Engulfing Candle indicates that selling pressure is very strong. It is expected that the chart will likely decline, so those who do not yet have a position should consider placing a short order when multiple Bearish Engulfing Candles appear. For those who have already entered a long position, it is advisable to place a sell order as quickly as possible to cut losses.

Upper Shadow Bullish Candle

An Upper Shadow Bullish Candle is a candlestick with a short body and a long upper shadow. Although it is still a bullish candle, it indicates that selling pressure is gradually increasing. If this trend continues, the chart is likely to switch to a downtrend.

If an Upper Shadow Bullish Candle appears in a high price range, it is recommended to place a sell order to enter the market. On the other hand, for those who already hold a position, it is advisable to place a closing order to exit the position before the trend definitively reverses.

Upper Shadow Bearish Candle

An Upper Shadow Bearish Candle is similar to an Upper Shadow Bullish Candle in that it has a short body and a long upper shadow. However, it is characterized by a bearish body. Depending on the Forex exchange you use, it is often displayed in blue.

When an Upper Shadow Bearish Candle appears, it suggests that there may soon be an upward trend. Therefore, those who are in a short position should place a closing order when this candle appears.

How to Determine the Timing to Sell Using Technical Analysis in Forex

In Forex, the timing to sell can also be assessed through technical analysis using tools like moving averages and Bollinger Bands. It is also recommended to utilize indicators such as Envelopes and RSI. Here, I will explain how to determine the timing to sell in Forex using technical analysis.

Moving Averages

A moving average is an indicator that calculates the average price over a certain period and summarizes the result into a single line. By examining the moving average, you can grasp the general trend of the chart and determine whether the current price is high or low compared to past prices.

To determine the timing to sell using moving averages, focus on the death cross. A death cross occurs when a short-term moving average crosses below a medium- to long-term moving average. This is considered a sell signal, and it is expected that the chart will likely decline after the appearance of a death cross.

Bollinger Bands

Bollinger Bands are indicators that add multiple lines to the moving average, which represent the price volatility based on past price movements. The price range of these lines is referred to as bands. Statistically, it is said that the price fluctuations of the chart will fall within the bands with the following probabilities:

Probability of falling within the mean ± 1σ: 68.26%
Probability of falling within the mean ± 2σ: 95.44%
Probability of falling within the mean ± 3σ: 99.73%

Given this characteristic, prepare to sell the currency pair when the chart approaches the ±2σ band.

Envelopes

Envelopes are indicators that draw lines above and below the moving average. They are primarily used for contrarian trading, where you buy when the chart approaches the lower band and sell when it approaches the upper band. Use this to determine the timing to sell.

When using Envelopes in a trend-following manner, pay attention to the timing when the chart breaks through the lower band. This timing is considered a sell signal, as the chart is likely to decline further. Those who already hold a position may be able to aim for larger profits by placing additional sell orders.

Ichimoku Cloud

The Ichimoku Cloud is an indicator used to assess the balance point of buying and selling over a certain period, helping to determine which force is currently dominant. The Ichimoku Cloud consists of five lines and a cloud, with the following meanings:

Base Line (Kijun-sen): The midpoint of the highest and lowest prices over the past 26 days.
Conversion Line (Tenkan-sen): The midpoint of the highest and lowest prices over the past 9 days.
Lagging Span (Chikou Span): The closing price of the current day plotted 26 days back.
Leading Span A (Senkou Span A): The midpoint between the Conversion Line and Base Line plotted 26 days ahead.
Leading Span B (Senkou Span B): The midpoint of the highest and lowest prices over the past 52 days plotted 26 days ahead.
Cloud (Kumo): The space between Leading Span A and Leading Span B.

To determine the timing to sell, check for the following three conditions:
「The Conversion Line falls below the Base Line.」
「The candlestick closes below the cloud.」
「The Lagging Span is below the price from 26 days ago.」
All three conditions are considered reversal sell signals. If all three reversals align, it is referred to as a three-role reversal, indicating a strong sell signal.

MACD

MACD (Moving Average Convergence Divergence) is an indicator used to determine buy and sell timing based on short-term and medium- to long-term moving averages. It uses the basic line (MACD line) and the moving average of the MACD (signal line) to read the market. To determine the timing to sell using MACD, utilize the death cross as with moving averages.

When the MACD line crosses below the signal line, it is considered a death cross. Additionally, the MACD graph includes a zero line; if the chart falls below zero along with the death cross, it indicates a stronger sell signal.

RSI

RSI (Relative Strength Index) is an indicator that helps assess the overbought or oversold conditions of a currency pair. It represents the strength of price movements over a certain period numerically. When using RSI to determine the timing to sell, pay attention to the RSI value of 70.

If the chart hovers around 70, it is a sign that the currency pair is overbought, indicating a high likelihood of a decline soon. If the chart exceeds 80, it suggests a significant drop may occur due to a correction, so it is advisable to close positions early.

Points to Consider When Determining the Timing to Sell in Forex

When determining the timing to sell in Forex, pay attention to the following:

・Confirm the overall market trend.
・Be aware that declines can happen quickly.
・Be mindful of negative swaps that may apply.
・Always check the risk and return.
・If using automated trading, frequently check the timing to sell.

Particularly, be cautious of the speed of price declines. Typically, declines occur faster than rises. Delayed judgment can lead to unrealized profits turning into unrealized losses, so exercise caution.

Conclusion

In this article, I explained the necessary timing to sell in Forex. Forex trading begins with an entry and ends with a closing. If the timing for this closing is not appropriate, it can hinder your ability to secure profits effectively. Delayed stop-loss orders can lead to unnecessary losses accumulating. To prevent this, utilize the candlestick patterns and technical analysis methods introduced in this article to grasp the appropriate timing to sell.