Correct Behavior After Entering a Trade

After entering a trade, traders must decide whether to hold the position or exit the trade based on market behavior. Effective trade management strategies are crucial for minimizing losses and maximizing profits. This guide explains the correct trading behavior, how to respond when the price moves against you, and when to exit a position based on price action trading strategies

After entering a trading position, two possible scenarios can occur:

The price moves against us.

The price moves in our favor

The first scenario can take various forms, which we will explore in detail.

Scenario 1 – The Price Moves Against Us

Recognizing a Failed Trade

Let’s say after a proper move and correction, a weightless candle forms, followed by a change of order flow candle. We place our buy order above this candle with a stop loss.

If our order is activated but the price does not move as expected, we analyze candle formations.
In Figure 1, our order is triggered, but weak opposing candles appear.
If these weak candles (3-4 in total) close within 50% of the range between the entry and stop loss, we hold the trade, expecting a move in our favor.

However, if:

More candles form, and the order flow candle fails to attract liquidity.
There are signs of market reversal or consolidation.

👉 We exit the trade at breakeven or minimal cost using a lower time frame for confirmation.

When to Manually Close a Trade

Exiting Before Stop-Loss Activation

The Next Candle Closes Beyond 50% of the Range (Figure 2):
- If a candle closes beyond 50% of the range and in its lower third, the next candle is expected to close similarly.
- This signals a downward movement, making it advisable to exit the trade early.

The Price Moves Close to Stop Loss (Figure 3):
- If a candle forms near the stop loss, it's best to let the stop-loss trigger rather than manually closing.
The Price Reverses Before Hitting Stop Loss (Figure 4):
- If a neutral candle forms, closing within 50% of the range, we can remain hopeful for a reversal in our favor.

Shadowed Candle Forms After Entry (Figure 5):
- If a shadowed candle appears, we analyze a lower time frame to assess further price action.
- If there's a high probability of another downward move, we may close the trade before the stop-loss is triggered.

Summary of Trade Management Strategies

After entering a trade and setting a stop loss, if the price doesn’t move in our favor, two scenarios might occur:

Scenario A: Price Enters a Choppy Phase

The price moves against us and enters sideways movement for up to three candles.
If the price does not spike after our entry, it indicates:
- A mistake in entry edge selection or
- A shift in market sentiment (orders withdrawn).
Action: Exit the trade immediately to avoid further risk.

Scenario B: Price Moves Against Us But Stays Within 50% of the Range

If the price remains inside the 50% range between entry and stop loss, we hold the position until further confirmation.

Conclusion

Understanding how to react after entering a trade is crucial for risk management. By analyzing candle formations, entry edge, and market sentiment, traders can make informed decisions on whether to hold or exit a trade before the stop-loss is triggered.