Online trading can be a tricky thing to get right, more so for new traders. One of the biggest problems that online traders face is knowing when to close a position. Closing a position requires decisive and confident decision making skills. The last thing you want to creep into your mind is superstition or gut feelings. You can retain profits effectively without missing out on future gains and reduce losses by simply knowing the best time to close your positions.
Whether you’re trading Forex, commodities, indices or stocks and shares, closing at the right time is vital for your quest to maximise your profits. Many traders, especially new kids on the block, tend to hang on to profitable positions for too long, getting worked up in the excitement of the markets going their way but before they know it, the market has swung, their greed has gotten the better of them and the profits have vanished.
Below you will find some dos and don’ts that should help you get your timing right, allowing you to maximise your potential profits while avoiding unnecessary losses.
Things to avoid:
- Holding losing positions for too long after the market has turned
- Not closing small profitable positions before they turn into losses
- Not observing obvious changes in markets that will affect your position
- Unreasonable expectations of profit from a single position
Things to do:
- Use stop losses to prevent huge dents to your bankroll
- Stick to your strategy and don’t make knee-jerk reactions
- Watch markets carefully for any obvious changes
- Cut losing positions promptly so you don’t go broke trying to recover what you’ve lost
If you follow these guidelines you will notice that your losses get smaller and your profits get bigger. You may only see small differences but online trading should be slow and steady way to invest, not a ‘crash bang’ ram raid in a bid for quick riches.