What Price Action Invalidates A Supply Or Demand Trade?

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 are my answers to your questions.

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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.

The distinction is between structural moves and noise. A sudden, strong move against you has information in it: either the market has repriced for a reason (news, an event), or the setup you took has been invalidated. Either way, staying in means fighting the new information. Smaller, one or two-candle dips are different — they’re often just the market breathing, and those I might hold through 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. The exception is a sudden change in direction — that’s when I’ll manually intervene.

The principle: your stop and take profit are doing the work in normal conditions. Manual intervention is reserved for cases where something has genuinely changed. If you find yourself intervening often, the problem isn’t your exits — it’s your entries.

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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.

Here’s the reasoning. When price reacts to a 1-hour zone, the reaction itself doesn’t prove anything new — it just confirms the 1-hour zone did what it was expected to do. For the reaction to be evidence of new interest, it has to show up on a timeframe that matters to the banks. If a bullish engulf on the 1H also prints as a demand zone on the daily, then what happened wasn’t just a reaction to the 1H level — it was institutional activity significant enough to register on the daily chart. That’s the difference between a bounce and a zone worth trading.

The practical takeaway: always check the higher timeframe before treating a lower-timeframe reaction as a new zone. Most reactions won’t pass that filter, and that’s the point — it keeps you out of the ones that are just noise.

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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. On the majors, during normal conditions, your fills should be close to the price you asked for. If they aren’t, the issue is usually on the execution side, not the market side.

A few things worth doing:

• Try to manually close your trades where you can, rather than relying on stop orders to fill at the exact level. Stops become market orders once triggered, which is where slippage tends to happen.
• 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.
• Track it. If you’re seeing slippage of more than a pip or two on the majors during liquid sessions, log the instances. A pattern of it points at the broker, not the market.

Something definitely sounds fishy with your slippage situation. On the majors, in normal conditions, you shouldn’t be getting slipped often enough to notice — let alone often enough to ask about it. That’s worth investigating properly rather than working around.

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Hope this helps.

Cheers,
PAN