No chance to win but passionate to hold the trade. How to do it? Is it a good idea to keep the trade stressing you?
If not!! Then why are you waiting? Probably you don’t have the idea to exit the trade known as a losing trade.
Actually, you are unable to know the value of losing trade. As if you have many winning trades to get remarkable outcomes. You are confused about closing trade. But don’t know how to do it?
Don’t worry this post is for you to remove your confusion by opening all the windows about losing trades. Let’s get to the question: When to close a losing trade?
It would help if you closed your losing trades: when the market price is going against you. The situation on bars is not clear. The losses are not less than half of its initial risk. However, it doesn’t work for all trading strategies. It depends on the market situation, timing, and consistency. It is necessary to understand your closing trade before entering the trade.
Losses are chunks of the trading system. You don’t try to get success unless you taste the pain of failure. Every success story has a background of failure.
If you want to learn from losing trades, scroll down to know more!!
What Is A Losing Trade
Some trades give you losses. When they disturb you by moving against you, they target your SL. Such trades make you in a losing position.
Actually, you have to face a couple of Losing trades; only one out of them will be a troubling trade at all.
So, a trade that makes you upset by repeating losses is a losing trade. Without losses, trading is not a business.
Trading skills are not completed without handling the losing trades, and you have to know when to stop trading.
When to Exit A Losing Trade
Exiting the losing trade during forex trading is a critical decision. Getting out of the losing trade from a complete system is not a big deal.
The main thing is how you get it out at your first opportunity??
Is it possible?? Yes, it is happening!!
The question is whether all your trades are going in loss?? Obviously not!!
In fact, many traders can get themselves back on track. You too can exit your losing trade out if you consider the following things:
1- When prices move against your expectations
If prices move against your expectations, you will easily decide to leave this trade. To do this, you have no time to observe the candlestick situations.
You go through the pattern of actions that shows everything simple and easy. This proves your first and quick decision.
In actual time, whether it is hours or even days, you have to think on your own to make your analytical decision. Now your previous approach seems to be far away from the second one.
2- Judge Yourself on Your Own
For deciding to remove your losing trade, one has to ask some questions like:
- Is this trade wasting my account in real?
- Is it a good idea to wait for the u-turn of losing trade itself?
- Is there a chance of losing much loss?
- Is my stop loss too tight?
When you succeed in placing a stop order at an exact point, just at a distance away from the price.
It may recover your losing trade, and you will be able to come back into the market with profit. It is not good to get aside, but it is good to exit your losing trade as soon as possible.
3- Follow A Perfect Trading Strategy
When you make a trading strategy, make sure that you must have a margin in the market. If you try this strategy, you will come to know about the winning trade.
In FX trading, no strategy works 100% accurately.
Even if some strategy possesses 10% to 70% losing trades, you will be intended to follow that signal.
The reasons are:
- The number of losing trades is less than winning trades.
- The winning trades are not much more than losing trades. But they have a high rate of gaining profit rather than losing trades.
In the market, we have many considerable systems of trends, but they have a very smaller number of winning trades because their winning trades offset the losses of losing trades.
5 Ways to Close A Losing Trade
Entering a trade is not everything. In place, you should also have a plan or strong skill to eject your trouble-making trade.
If you fail to handle your losing trade, it will never let you benefit from winning trades.
To do this, you have to follow some proven principles that enable you to tackle the losing trades properly. Such clear ideas are well determined through regaining previous experiences.
To understand these rules, go through the following ways to close your losing trade:
1. By Fixing A Stop Loss
Stop-loss order is a gifted instrument of the Forex business. This gift is available for you to save you at a specific point. At some points, your losing trade is needed to exit without wasting time.
Simply this tool is to save your account during risky trades. However, it does not work 100% exactly in some situations.
Each one of you doesn’t like to afford the risk of more than 2% on each entry. Your emotional psyche doesn’t let your stop loss disturb your trading plan.
So, avoid placing a too tough stop loss on your trade. It may hurt your trading attitude. Similarly placing the stop loss to distance away is also not a good idea. For this, you have to hold little positions.
When the market shows gaps to a specific extent, you should exit your trade without waiting for anything.
For example, if you have fixed your stop loss at $10, but the market breaks to $5, you should not wait and exit your trade at $5.
In short, a stop loss lets our entry get out as at that time getting out is smart behavior than jumping into.
2.By Using Trailing Stop Loss
By taking the facility of adjusting the trailing stop loss at some particular point, your stop loss will trail the price for you.
So, there is no chance to eject your trade without reversal of the trend. However, in real situations, it doesn’t work exactly.
Because the forex market is too clever to hit the trailing stop, but you can stop this by jumping again into the market quickly.
Overall, trailing stop losses are a great mechanism for increasing outcomes and decreasing losses.
When the market is going up, they become the lock-ups of your trades. They guarantee you as if the price shifted under the stop-loss point, it will never allow the winning trade to get the place of a losing trade.
3. Good Time to Get Out
The trading game totally depends on timings. When your trade doesn’t expand according to your indication, you may like to get out of your trade.
In this way, you can easily put fresh trades expecting something better in your support.
By defining the right time of closing your trade, you are only increasing your stay in the trade.
In case of some other entries from the exit trades before you. You are kicked out of your entry. The timing of the exit has a great impact on our trading strategies.
Most trading schemes depend on the specific exit system because they perform very well.
It would help if you never ignored such trading trends as they are easy and clear; you can test the time frame of exit to prove it.
4. Defining Favour and Reverse Position
Sometimes you place your stop about resistance or favoring points. Usually, specific points of resistance or support at a price are the targeted points by the market.
The market is always in search of cracking the level of support or resistance.
For example, the early level of support or resistance may be up or down, not in odd numbers like 110, etc. You should know how the market has treated it before. If it is checked many times and exists, so this point is of great importance.
While applying for the resistance/support technique, try to find the specific level. Now put your stop loss a bit far away from the support/resistance.
If the market succeeds in interrupting that point, your strategy goes against the market direction. This makes you excited accordingly. Plus, you come out gifted with a loss.
5. Closing the Losing Trade Quickly
Holding a huge losing position is a headache. This can make you and force you to jump in again.
Naturally, you go to cut off your trade quickly, which makes you close your entry with a loss.
At that time, compare the size of the trade with the size of your account.
If your account is smaller than the trade size, you should decide on closing your trade within seconds without any wait.
The forex market is fast and uncertain. Situations change within minutes. Closing the losing trade is not a bad idea if the market goes under the changes below:
- The prominent trend goes in the opposite direction.
- A SCAM reverse action happens to reopen the trend with revived energy.
- Support/resistance level works against your anticipations.
- The bottom or top shows a massive change.
- Gaps disappear after a short flow.
Frequently Asked Questions
How long should you hold a day trade?
Day traders trade for the future. They should keep their trade under 24 hours. However, they should not go through the day trading principles.
Stockholders are free to purchase at the winding up of the day and sell it on a coming day.
How long should you hold a trade?
Being a scalper, you should hold your trade for a short time (seconds to minutes). Day traders should keep trades for a time period that starts from minutes to a full day. At the same time, swing traders should hold their trades from 4 hours to some days.
After going through the above post, we know that we have 3 strong options to tackle the losing trade properly: revival, amendment, or just waiting.
Amendment and waiting are manageable strategies. Revival of the trading position
Is probable. But it needs hard work. It would be best if you had to uphold the precious risks with open-mindedness.
Whenever you’re losing trades extend the winning trade, you will have to close your losing trade as soon as possible.