How bad is it to close losing trades early? What I mean by ‘losing’ trades is - trades that are clearly moving against you that you feel will eventually hit your SL. For instance, last night I closed my NZDUSD long on D1 trade.
I took this trade because of bullish engulfing bar a couple of days ago. The price was really struggling to break through the ascending trendline for 3 days in a row - every time the price went up the bears pushed it way down again, resulting in 3 hammer formations. I closed the trade when I saw this and this morning I saw that I was right and the price had continued to move downwards
How bad is it to close trades that you feel are losing trades that will not go in your direction? I’ve also had situations where I closed trades early to find that if I kept the trade open it would have eventually hit my TP. Should I have just let this NZDUSD trade run? If I had it would be still on the way to hitting my SL.
for me if I see my trade clearly going against me, I close out. Why leave it open and lose more money? Might as well close it right away. But, there are times like you said where price will start going your way, but to me that just means that my entry was a bit off, and I just go back and reevaluate things
I am closing most losing trades much earlier than the stop-loss these days but this relies on two factors to keep me on-side - firstly the trades are trend-following so getting out early is an opportunity to re-enter: secondly, a really wide stop-loss.
I take the decision to exit based on the TA features I use as a check-list to get in in the first place. As these start to disappear or reverse or weaken, these can be indications an exit is becoming due. Some are more meaningful than others so some will cause an exit on their own, others will need a second signal as confirmation. My trades are very highly standardised, using a single strategy, so they all have the exact same features to support entry: this makes deciding whether to hold or exit a whole lot easier.
This was what I was thinking with my NZD trade above. I entered based on PA candles that I saw according to my trading rules - when I was that a conflicting PA candle has formed then the TA basis of my trade has become less valid, if not entirely invalidated.
The reason I even make this thread is that I get conflicting information - some people like you guys close out trades that are clearly not going to hit TP. But others say once you take a trade, let it go til it hits either SL or TP.
I can certainly say I was one of those guys who would say always leave your losing trades to run until they hit the stop-loss. But keeping a journal of trades cured me of that. I found that if ever one of my trades went 50% of the way back to its stop, it would never recover to make a decent profit. OK, so a minority would get back to break-even but absolutely none made any real money.
So I too needed to review what I had been told. It was clearly wrong to draw the stop in tighter, that wasn’t going to make any more profits. Plus, I started to be very strict about taking only trend-following trades and organised about having pre-defined trend recognition/confirmation points to depend on. The thing about getting out of a trend early is if you’re wrong, and you get out early but the trend resumes and continues, then your original TA is still right: on top of that you might even be getting in at a more advantageous price due to a pull-back.
Really what I advocate in addition now is to continuously assess the trade’s TA after entry - dynamic assessment. If your original trend was confirmed by say 7 of your 10 recognition points you might estimate it has a probability of continuing of say 65%. But if 2 or 3 of your 7 points fall away and the probability drops, maybe its now only 50%. There’s no point being in a 50/50 trade which has got weaker. But if price recovers and gets back into the trend and now you see 9 of your 10 recognition points and now you’re estimating there’s an 80% probability of continuation, you’d be crazy not to get back in.
I realise now a lot of the experts I had learned from were not trend-followers. Without them defining that, they automatically mislead their audience.
When my analysis not works practically and trade go against me , I used hedging strategy , but it’s not an appropriate way to minimize your loss, better to close the order.
Hi! I’m new here from Holland.
I use the Ichimoku indicator with Heikin Ashi candle sticks as long as the trade runs,
You can see the Blue line. It is the Kijun-Sen (equilibrium line)
When the candle sticks are red and and far away from the Kijun-Sen you can let it run.
But when the candle sticks cross the Kijun-Sen you must stop the trade. So your “feeling” was OK and now you can see when you definitely must close the trade.
All the best to everyone!
It’s pretty hard to understand hedging. During my course work in Econ, that concept always had me scratching my head on how to apply it in real world situations. It took me years to comprehend how valuable it is. And just this weekend, I can finally see on the charts how hedging not only reduces risk, but can eliminate it and in the end, it is the ONLY WAY to make profits. That discussion is way outside the scope of this thread.
Hedging, in the way that it’s commonly thought of, would have prevented your loss.
But that’s not the problem. Your mistake is far more basic than that, and it’s made by billions of humans, every day they function in any market (including the labor market):
You bought high.
The solution is far more difficult to implement:
Buy low. Sell high.
In the event you buy high, the only way to protect yourself is thru common hedging, combined with a strategic exit from your high-cost long entry on one of those dead cat bounce peaks… with your hedge racking up the profits in the mean time.
Once it looks like the correction is over and the uptrend is starting to resume, you can go long again, with your hedge still in the black. You can take profits on the hedge when it appears that your assumption that the up trend has resumed, and control risk with a trailing stop, if so desired.
In this scenario, your losing trade is now a winner, and you get back into the long trade at a more favorable position, if such a favorable set up presents itself. In other words, the goal isn’t to look for favorable long entries, as they occurred in October on your chart. The goal is to look for favorable entries, long or short.
Yes you can hedge your positions to avoid from more loss. Hedging will compensate your loss but you need a practice where when and how to use hedging technique.you have to open another position against the prior position . Not be in hurry to close loosing positions it may take a turn and you get some profit . It all is decided on base of your right analysis.
Have you ever looked at sentiment data? I’ve always wondered why large speculators are usually wrong so often?.. So much so that contrarian traders will use this data to take trades against the large spec positions…
This is downright unbelievable!
For you, it’s not a matter of strategy at all, at least not yet.
It is a matter of beliefs.
Trading in the Zone, by Mark Douglas. I recommend the audio version. Listen to it over and over again. After that, I found 3 conferences by the late Mark Douglas on youtube. These take the principles from that book to a whole different level. Really driving home how counter productive beliefs lead to losses, and productive beliefs lead to consistently successful trading, if one is determined to do what it takes to get to that goal.
Once you have deactivated counter-productive beliefs about hedging and buying high and selling low, then you can revisit strategy.
At that point, we can revisit hedging, if you like. If you already believe hedging won’t fit, you take action to cause that outcome to happen. That’s how self-sabotage works! No point in talking about it, if you’re already prejudiced by doubt.
If and only if you have a mindset characterized by productive beliefs, with the self-sabotaging beliefs fully deactivated and de-engergized.
From my own experience, nothing feels worse, more disappointing, more discouraging, than having a right analysis, seeing a move set up days or weeks in advance, then failing to make a profit or even losing money on the move, even though my analysis was right.
Eradicate self-sabotaging beliefs, and replace them with the belief that “I am a consistently successful trader” – and take the actions to make that happen.
At that point, strategy and right analysis can work their magic.
Hi, sorry for what happened to you. But if was me I couldn’t close that position. That’s not hammer on top, hammer is after downtrend, those are spinning top professionally you might call them retracement where bulls try to push market up but look at how bears reject higher prices with those longer upper shadows and small real body. Trend line are not better for judging S/R, learn how to clearly draw support and resistance using horizontal line. Learn how to correctly use candles, learn how to know market psychology. Learn to use oscillators esp ADX to measure slope intensity though you can use any of your favorite. Use intra-day for market entry. Identify price action from bigger timeframe to be sure what you see is being formed on resistance/support either any was not broken or it was false breakout thus you might find yourself into right road as you enter the action
“When people start their trading ,it will be always like this. You have to practice it a lot. First, my advice is go back to backtest and then see the result. You will see win/loss ratio.
It like you are a player and go back to sit as manager. You will see how you can improve it.”
If you don’t feel comfortable with your open position and market movements, you should take the loss and close the deal. If your SL would eventually being triggered, then it is better to cut your losses.Then try to analyse, for future deals, what were you initially thinking and what actually happen
