I really enjoyed the books, and I have gone through all of them and even all the articles. After trading for some time, I had thought of 3 questions that I wanted to ask you.
Question 1
Do you have a set of rules you follow to invalidate a trade? Do you ever close a trade early or should price hitting the stop loss be the only invalidation? Right now my biggest issue is that I have been closing my trades early and taking profits before my targets hit.
Would a better plan be to just hold the position until it either hits my target or stop loss?
Question 2
Sometimes when the price hits a zone it would create a large engulfing that makes it look like a new zone is formed.
How would I know whether this a new zone or just a reaction?
Question 3
Another issue I have been having is that when the price reaches my stop loss the transaction would actually be for a price much further away than where I set my stop loss.
This is because of the slippage caused by my stop loss market order.
I’m having trouble maintaining my Risk to Reward ratio due to the slippage.
Do you ever face this issue?
Should I use stop limit orders instead?
Thank you for taking the time to read this. I hope to hear from you soon.
Regards,
My Response:
Glad you liked the books!
Sorry about the delay – some website hiccups kept me busy.
Here’s my answers to your questions:
Q1: When to Close a Trade?
For me, a sudden and strong price movement against my position usually signals it’s time to exit. About 90% of the time, I’ll manually close the trade, especially if it’s due to major news or events. But for smaller, one or two-candle dips, I might hold on and see what happens next.
Generally, it’s a good idea to let the trade run its course until it hits your stop or take profit. I usually trail my stop as new highs or lows form, then let the market decide when to close me out – unless there’s a sudden change in direction, then I’ll manually intervene.
Q2: When is a New Zone Valid?
A new zone is only worth considering if it creates a zone on a higher timeframe.
So, if the price dips into a 1-hour demand zone and leaves with a bullish engulfing candle, that new 1-hour zone is only valid if it also forms a demand zone on the daily or 4-hour chart. If it doesn’t, it’s probably just a reaction to the original 1-hour demand and not a fresh zone with a high chance of reversal.
Q3: Dealing with Slippage
Significant slippage in forex is pretty unusual, unlike in the stock market.
If you’re experiencing it often, question your broker.
Normal market movements shouldn’t cause large slippage unless you’re trading exotic or illiquid pairs. If you can, try to manually close your trades to avoid it.
If the problem persists, consider switching brokers. Frequent, high-impact slippage that messes with your risk-reward ratio isn’t normal. I’ve only had a handful of bad slippage experiences in the past year, and even then, it didn’t affect my R/R too much.
Something definitely sounds fishy with your slippage situation.
Hope this helps….
Cheers, PAN