• Matt DeLong

What is a right time to close a trade?

There are 2 scenarios that come to mind: 1) Know when to hold 2) Know when to fold.

Take a Loss

Before you enter a trade, you need to know when to “bail” on a trade. Assume 50/50 odds that the trade *may* move against you — when will you exit and close the position for a loss? We typically refer to it as a “STOP”. Before I enter a trade, I know my entry, stop & position size (calculated by my risk management strategy of “Trading an R” — link here). So, before I jump into a position, I know where I will pull my emergency brakes and deploy my parachute so I can trade another day and preserve my capital. Most novices will add to a losing trade and double their position to “dollar cost average”, which now doubles your losses and each tick against your position now moves twice as fast. DON’T BE “THAT GUY”.