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To Take a Trade or Not When You Know You'll be Offline

To Take a Trade or Not When You Know You'll be Offline

John Kicklighter, Chief Strategist

Talking Points:

  • Different traders have different time frames for their trades, but there is always a cut off for when is too long to lose track
  • Those with a very short-term time frame (15mins) shouldn't hold 'overnight', while those trading for months can check out for weeks
  • It is important to ask ourselves about liquidity, our degree of confidence, stops and targets, time frame and our ability to change

Confidence is not inherent for most, even when they have spent months or even years learning the markets. Download the DailyFX trading guide for Building Confidence in Trading.

What do you do when you are fairly confident in a trade, yet you know you will not be able to monitor it as closely as you'd like? Given most are only able to dedicate a mere portion of their time to analyzing and trading the markets, this is likely a problem that you face whether you realize it or not. For most, evaluating the time frame of your average trade or specific setup you are consideration at the time of execution decides for you. Traders at the shortest end of the spectrum - such as those whose standard periodicity chart is 15 minute bars - probably should not hold trades overnight. The time frame for any trade we intend to execute should generally fall within the historical price action that fits into our chart. At the other extreme, those trades with an intended holding period of weeks or even months don't need to necessarily be tended overnight, over weekends or even for weeks at a time.

Personally, my average time frame for trades falls within a two-day to two-week time frame. And, considering my scale changes according to market conditions, the struggle for trends and progress lately means my exposure has tended to average at the shorter end of that spectrum. In these circumstances, holding over the weekend becomes a greater risk - especially given the uncertainties occurring over recent weekends from the Catalonia referendum to the escalations surrounding North Korea-US tensions. Being unable to check the markets with any degree of consistency over the next two weeks - which I find to be my case - makes for a nearly impossible to manage schedule. That is unfortunate as I believe there is so much pent up potential between monetary policy and general risk trends in this market. However, the low probabilities of picking tops and bottoms or timing in general is made near impossible by an irregular assessment of the markets.

For me, the answer is clear when it comes to assessing whether I should consider taking trades before I have to be away from the markets. However, for many others, that evaluation is far less black-and-white. So how should we evaluate the situation? There are a few questions I ask myself when faced with this dilemma. First, is liquidity decent. While EUR/USD is a better candidate than USD/CNH in general, the former has its own lulls when it comes to weekends or certain seasonal conditions. Then, I ask whether I am truly confident in the trade which means there was a clearly defined evaluation made and strategy in place. Clear stops and targets are exceptionally important when our ability to check the market is irregular. Establishing for myself what the trade's time frame should be is something I do regardless of whether I monitor actively or not, but it is especially important when you cannot keep tabs. The same is true for being comfortable when conditions change and I need to alter or remove a trade. If you check in and the path you intended is no longer apparent, it is important to cut the trade. What are the determinants for taking a trade when you can't dedicate your full attention to the market? That is the focus of today's Strategy Video.

To Take a Trade or Not When You Know You'll be Offline

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