Case Study: What would you do in this scenario

Suppose you have a position of Buy EUR/USD at 1.08.

The price came off. By your analysis, you should have already been in the green, with the price around 1.0835 at least.

However, base on your analysis, EUR/USD is still a buy.

You added a buy at 1.07.

Current price is at say, 1.0745.

Let’s assume you’re on a swap-free account.

Which of the below do you perform?

  1. Do nothing.
  2. Close all positions.
  3. Close the buy that is in profit and see what happens.

Now that you added a second long to a losing long position you are over-exposed to EUR/USD. One of the positions must go. I would close the first trade, the buy at 1.0800.

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if you are over expose / over leverage

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Buy 1 position at 1.08, pending sell order beneath it say 1.0775. Price goes to 1.07, close short position for +75, open another buy at 1.07. Price just needs to go back to 1.0715 to make 5 pips from the trade… or a countless other scenarios based on your trade plan.

Here’s probably the most common risk management style I’ve seen. -50, +75, +50.

A scenario that often occurs in our trading @AkiyamaShinichi. If in the scenario above, I would do number 3, close the buy that is in profit and see what happens. This case does involve mixed emotions. However, decisions must remain calm and realistic. If I have to cut losses, then I have to do it.