First you were right in closing this trade since it's not in your plan yet. Good for you.
Here's how I do overnight holds:
(1) In general, I need a s/r level protecting me, AND a decent profit from the trade already. I never, ever, ever, hold a losing trade. (Rationale: if it does start working later, there will be another chance to get in.)
(2) Since I already have a profit, I must re-evaluate the risk-reward. It still has to make sense. Also consider getting smaller.
(3) I always have a stop order in. Yes, I get shaken out of thin overnight markets. But sometimes I don't. And this way I can't get killed.
(4) I have an alarm set near the profit target to wake me up. When it gets to my target I give it a quick chance to keep going (by making the stop really tight). If it exceeds my target, I reposition the stop at the target and go back to sleep.
It's really very simple. It has to make sense.
If you are ever struggling with a trading decision, it means that it's a marginal bet- there are equal pros and cons. When this happens in poker a flip a coin. When this happens in trading, I usually just get out, or at least make the stop very, very tight.
Example: Shorted the Yen on Weds evening. By Friday's close it got down to, but did not break a key s/r level. I took my profits and went flat for the weekend. When the market opened last night, it broke down thru this key level. There was an opportunity to reopen the short so I did. I baby sat for a few hours. I couldn't make heads or tails of it, so I made my stop very tight (protecting a very small profit) and went to sleep. Around 3am I woke up to alarm bells-- the Yen tanked again after I left, my stop was never taken out-- and it hit my profit target. I tightened up my stop again, it was hit in five min. It ended up just being a shakeout, but all-in-all, I still got most of the move.
Here's how I do overnight holds:
(1) In general, I need a s/r level protecting me, AND a decent profit from the trade already. I never, ever, ever, hold a losing trade. (Rationale: if it does start working later, there will be another chance to get in.)
(2) Since I already have a profit, I must re-evaluate the risk-reward. It still has to make sense. Also consider getting smaller.
(3) I always have a stop order in. Yes, I get shaken out of thin overnight markets. But sometimes I don't. And this way I can't get killed.
(4) I have an alarm set near the profit target to wake me up. When it gets to my target I give it a quick chance to keep going (by making the stop really tight). If it exceeds my target, I reposition the stop at the target and go back to sleep.
It's really very simple. It has to make sense.
If you are ever struggling with a trading decision, it means that it's a marginal bet- there are equal pros and cons. When this happens in poker a flip a coin. When this happens in trading, I usually just get out, or at least make the stop very, very tight.
Example: Shorted the Yen on Weds evening. By Friday's close it got down to, but did not break a key s/r level. I took my profits and went flat for the weekend. When the market opened last night, it broke down thru this key level. There was an opportunity to reopen the short so I did. I baby sat for a few hours. I couldn't make heads or tails of it, so I made my stop very tight (protecting a very small profit) and went to sleep. Around 3am I woke up to alarm bells-- the Yen tanked again after I left, my stop was never taken out-- and it hit my profit target. I tightened up my stop again, it was hit in five min. It ended up just being a shakeout, but all-in-all, I still got most of the move.
