Having a huge profit on an open position is a good feeling, but your decision on what to do next shouldn’t take into account how much profit you have made already – don’t count your money and use this as the basis of your decision. Instead, ask yourself whether you really believe that your trade will continue to move in the right direction based on real market signals.
For instance, if you are in a strongly trending market, then it often makes sense to keep your position open until there is a clear signal to exit. For instance, if you see new highs being made on a daily basis in an uptrend, then the best thing to do is to keep your position open and limit your risk by using a trailing stop. Keep your stop slightly below the previous day’s low and let the trade run until the market closes your trade for you. Alternatively, simply set your stop to track the 8 day EMA – this will keep your stop at a reasonable level below the current price until the trend reverses.
However, if you do this, keep a lookout for opposing price action. A strong signal such as a large bearish pin bar in a rising market is a signal for you to take your profits. Similarly, keep a lookout for support and resistance levels – if you have already made significant profits, there is no reason to take risks. Even if you think you see a breakout signal as the level approaches, remember that many breakout signals are false. It’s often better to take your profits rather than betting that a trend will continue through a support or resistance level.
On the other hand, price action can also be a good indicator that you should stay in the market. Again, if you are riding a trend and it starts to flatten out, you may be tempted to exit – and perhaps you should. However, if you see a strong pin bar that reaffirms the trend, or any other supporting price action, then consider staying in the market. Again, make sure that you have your risk management strategy in place using trailing stops, but don’t exit the market by yourself when all of the signals are pointing in the right direction – let the market decide.
Editors’ Picks
AUD/USD holds above 0.6500 in thin trading
The Australian Dollar managed to recover ground against its American rival after AUD/USD fell to 0.6484. The upbeat tone of Wall Street underpinned the Aussie despite broad US Dollar strength and tepid Australian data.
EUR/USD comfortable below 1.0800 lower lows at sight
The EUR/USD pair lost ground on Thursday and settled near a fresh March low of 1.0774. Strong US data and hawkish Fed speakers comments lead the way ahead of the release of the US PCE Price Index on Friday.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
Google starts indexing Bitcoin addresses
Bitcoin address data is live on Google search results after users realized on Thursday that the tech giant started indexing Bitcoin blockchain data. However, mixed reactions have followed the tech giant's reversed stance on the cryptocurrency.
A Hollywood ending for fourth quarter GDP
The latest revisions put Q4 GDP at 3.4%, the second fastest quarterly growth rate in two years. Much of the upside was attributable to stronger consumer spending, yet fresh profits data affirmed it was a good quarter for the bottom line as well with profits up by the most since the Q2-2022.
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