Another question that I have received at the website over the years is should I hold my trade or trades over the weekend? This is a great question and topic overall. In this article I will break down my answer to this question.
Firstly, the best way of answering this question relates to what sort of trade it is that the trader is holding before considering whether to hold or exit their position.
Is it a Day Trade or Short Term Trade?
This relates to trades taken on the 1 hour or lower where a trader is aiming for a small amount of pips and often a trade which is closed by either the end of the market session or by the end of next day’s session. These types of trades can be closed before the weekend close as the trader was only targeting a small amount of pips.
In other words, these types of trades can be closed whether the trade is in a small amount of profit or a small amount of loss before the end of Friday’s session.
Is it a Long Term Trade or Trend Trade?
This relates to longer term trades that were taken on the 4 hour or higher time frames where a trader is aiming for larger market moves in the market and where in some instances the trade needs to be held a couple of weeks or even a couple of months. In this case, as the trade is a long term trade where a trader is focused on a larger move in the market, in particular trend based trading then holding over the weekend is a part of the process.
When entering a trend based trade all a trader wants to do is set the risk, set the management levels for taking partial profits and then let the trade run. Only a few options can happen; the trader takes a small loss or the trade meets management level 1 or 2 and then the market pulls back or the trade runs as expected and gives a strong move in the trend ( a longer term move ). Two of these options are profitable for a trader and the strong trend based move being the most profitable between the two.
So when it comes to confronting the weekend close, it is part of the process with these types of trades, there is no reason to avoid the weekend, instead prepare for possible outcomes which I will get to in a moment.
Remember that following the process of an effective trading plan ( and strategy ) is the most important aspect of all forms of successful Forex Trading.
Prepare for the Weekend
What I mean by preparing for the weekend is preparing for a possible price gap in the market that could affect a trade.
One of three scenarios can happen holding a trade over the weekend;
- The market gaps in the trades favor. This is good news for a trader. A common gap is 30 to 50 pips.
- The market gaps against the trade position. A common gap is 30 to 50 pips.
- The market does not gap at all or gaps less then 20 pips.
*In rare cases gaps can be larger if a big event release happens over the weekend effecting market price.
**Price Gaps happen sometimes due to over weekend currency exchanges and over weekend trading.
With the first scenario, the best way of preparing for market moves in a trades favor is by doing nothing, just keep sticking to the strategy management process for that trade.
The second scenario is best managed by limiting risk and exposure. I recommend that traders risk less than 2% per signal in the market, referring to less than 2% of account size. This helps protect the account from gaps or similar situations where it can lead to a potential loss. Remember, the average gap is quite small, so when holding a long term trade most of the time the trade will be able to handle this type of gap.
This topic also relates to the importance of following an effective process in trading and sticking to discipline when holding a trade. If the process says hold the trade until management phase 1 before taking partial profits on the position, then as a trader you need to follow your rules. This is very important. Just like if the trade does not go as expected, then you need to accept the loss that may happen.
Above – Should I Hold My Trade Over the Weekend Video – A video made on this topic back in February 2014. I am planning on doing an updated video on this topic very soon, however this video is still relevant to the topic that is covered in this article.
Now lastly before I finish up this topic, I wanted to highlight an exception to the rule when it comes to holding that a trader can consider. One exception is when the trade is not moving much from entry for a few days of holding and market is still near the entry price whether a small amount in negative or a small amount in positive profit before weekend close. These types of trades a trader can consider closing before weekend close and reassessing a new possible setup position after the market opens.