Correct Behavior After Entering a Trade: Key Strategies for Managing Price Movements

Correct Behavior After Entering a Trade: A Strategic Approach

After entering a trade, traders must stay calm and strategic, preparing for two possible outcomes:

The price moves against the trade.

The price moves in our favor.

Scenario 1: Price Moves Against Us

When the price moves against us, several situations can arise. Let’s look at some examples to better understand this.

Imagine we entered a buy position after a "weightless" candle formed, followed by a "change of order flow" candle. We placed a buy order above this candle with a stop loss in place. Upon activation, the price does not move as expected, but the candles show weak movement in the opposite direction.

In this case, as long as the price remains within 50% of the range between our entry point and stop loss for 3-4 candles, we can reasonably expect the trade to eventually move in our favor. Therefore, patience is essential, and we should avoid closing the position prematurely.

Scenario 2: Price Moves in Our Favor

However, if after entering, the next candle closes beyond the 50% range, signaling an adverse price movement, it’s time to exit the trade. For example, if the next candle closes in the lower third of the range, it is likely the next candle will close similarly, activating our stop loss. This strong opposing candle indicates a downward move, signaling a probable downward correction. Exiting the trade early can minimize potential losses.

Close a Trade Only After the Closing Candle

Avoid rushing to close a trade immediately after entry. Always wait for the closing of the next candle to assess the situation more accurately.

In scenarios where the price moves against us but doesn’t breach the 50% range between entry and stop loss, it may be worth holding the position. However, if the next candle shows clear signs of an adverse move, it’s prudent to exit.

When to Exit the Trade

Scenario A: If, after entering a position, the price moves against you and stays within a choppy range for three candles, reaching the entry range slightly above or below, it’s best to close the trade. This situation suggests that there was a large accumulation of orders expected to push the price in your favor. If this doesn’t happen, it could indicate a shift in market sentiment or a mistake in choosing the entry point

Scenario B: If the price moves against your position but remains within the 50% range from your entry and stop loss, hold the trade until the next candle closes in the lower third. If it does, the likelihood of the next candle closing downward increases, triggering your stop loss. Alternatively, if the price extends beyond the 50% range, exit the position to limit further losses.

Conclusion: Strategic Patience and Precision

Correct behavior after entering a trade requires careful observation and patience. Traders should assess market conditions after each candle closes, adjusting their actions accordingly. Holding a position when the price is still within reasonable bounds can lead to a profitable trade, but if the market moves too far from the entry point, exiting the trade quickly minimizes risk and loss.

By adhering to these strategies, traders can maintain discipline and improve their chances of success in the markets.

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