You can close a deal at any time, the rules are the rules, but the best rule is that if you doubt that it’s not worth it, immediately exit the position. Your gut instinct will never let you down. If there is not enough determination to exit, that’s what a stop loss and an iron will are needed for, to exit on it to comply with your trading system.
Usually it is not worth much effort to make decisions when the price goes in your desired direction.
The most interesting cases are when the price goes against you. We try to consider them in our book, because such situations are the basis of trading. Let’s take another look at those situations when you are trapped by the price movement against you.
1) If you have a stop loss, then just think about whether it is worth moving it closer to the current price and reducing the possible loss;
2) If you are working without stops, and you are placing applications for a phased closure of a position, it is worth considering whether to make such applications equal in the number of lots or to make the first one more, and the rest less in the pyramid. For example, the first 80%, the second 10%, the third 5%, etc.
3) You believed in your idea and missed the price, which gave a loss already more than what you expected. Close the deal urgently. Do it ruthlessly. If you really want to continue, put a new application above the current price in your direction by 1% higher. It is better to put a take profit order that will work itself when the price stops “hooliganism” and goes in your direction again.
4) You logged in once a day to check how things were going in an open position. Things are going badly – every day the drawdown of your position is getting bigger and bigger. The hope that everything will be fine is still warm in you. The bill is melting before our eyes. You will be surprised, but this is how millions of traders around the world drain their accounts. Everyone knows the story of one Latin American who drained $ 2.5 million of altconin LUNA in a week! What to do? The price may even accelerate the fall. There is only one way out – close the position urgently. Next, two options. First, you forget about this paper, rest for 2-4 days, if for more, then try your luck on another instrument. The second option, for a more professional trader, is to immediately place an application either at the old price at which the first application was set, or 1-3% higher than the current price (we assume that you are in a long position). Why not a short? The fact is that long gives more profit than short. According to world statistics, shortists are more likely to drain the bill than longists. Also, longists never pay for a loan, they do not have a margin stake (if only their own money is in the case).
5) If the paper is flying down too much or there was a spill, we move to the short position. We put reasonable stops. I recommend putting a take profit of the application in case of a temporary price rise during a rebound. Then the price will go down, and your application will be picked up. Next, we move the stop for the price.
The recommendations described above will allow you to save a lot of money. You will even be surprised at the survivability of your account!