What do you do when you enter a trend following trade and turns in consolidation pattern? Do you wait it out or close the trade?
Both - I’m usually going to wait it out - but only for a certain amount of time, then I’ll close it. The sooner that other opportunities show themselves in the market the sooner I will exit.
To be honest, this doesn’t happen very often because I don’t enter these trades live, I always enter via pre-set orders, so price has already started to move before I even enter the position.
Plus, I also consider the particular entry signal. If I have used a signal which is supposed to predict a dramatic price movement, then I don’t allow the position much time to confirm this.
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good question - i’ll be interested to see others’ replies
much of what @Tommor said above applies to me, also - i almost always enter trades by buy-stop/sell-stop orders
it depends a bit on the entry-type: for a small minority of my entries, i want, need and expect the price to move in my direction quickly after entering and will close quickly if it doesn’t
but for most, and/or if i “just don’t know what to do,” i err on the side of waiting it out
my reason for this is the belief that when prices have been trending and then consolidate, in the absence of price-action-related reasons suggesting the contrary the next trend-direction after the consolidation has an almost 65% probability of being in the same direction as the trend-direction before the consolidation, and because i’m doing “continuation entries” it makes sense, overall, to err on that side
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So if you get your stop order hit but ends up being a false breakout you close the trade as quickly as possible?
Inevitably, if you do enough trend-following trades, you find you have entered a position just before the trend fails. I always set a stop-loss as I am setting the entry order and the SL would be at a level at which I would not want to be entering this trend anyway. When its hit, I’m out.
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