Price stall

[rasico]

I have been unable to find the answer to my following situation in the forum. Using the NickB method, how would you handle the following scenario?

You take a trade on its break of a resistance line. You are seeing a lot of price action. The price goes up 20 -25 pips, very quickly, but doesn't hit your target. Now the price drops very quickly back to your entry point. The price then proceeds to oscillate between break even and a 20 pip loss. This continues for the next day. Should I hold on to the trade, thinking that the stops at the resistance lines were taken out on the previous bounce, and that eventually, given that I am going long on a bull trend, the price will recover and I will get my 50 pip target? Or should I cut my losses and try to sell as close to my entry as possible?

Thanks ahead of time for any assistance on how to handle this scenario....

[NesmithDJ]

You need to cut your lost short because the momentum to go long is gone. Do you know what triggered the price to jump 20-25 pips? How do the surrounding candlestick look like? Post a picture of the chart.

[Fetor]

Originally Posted by rasico

You take a trade on its break of a resistance line. You are seeing a lot of price action. The price goes up 20 -25 pips, very quickly, but doesn't hit your target. Now the price drops very quickly back to your entry point. The price then proceeds to oscillate between break even and a 20 pip loss. This continues for the next day.

This is not an easy question to answer since market conditions and candlestick patterns are going to come into play.

Originally Posted by rasico

Should I hold on to the trade, thinking that the stops at the resistance lines were taken out on the previous bounce, and that eventually, given that I am going long on a bull trend, the price will recover and I will get my 50 pip target? Or should I cut my losses and try to sell as close to my entry as possible?

Since you are in the trade, before you cut it loose it is wise to ask yourself if there is a good reason to cut it loose. What do you see in price action? What candle patterns have formed...may be forming. And what news is coming out. If you are in the trade and you don't see a good reason to cut it loose then ride it out. You should have prepared your trade ahead of time as far as stop loss distance and number of lots, so that if the trade fails you have maintained good money management.

In the scenario you gave above you'll have to watch the candles as they open and close. If it is oscillating as you put it then what is causing that? Clearly the price has pulled back but the bears can't drive it lower. The bulls are still holding and the market then starts to produce some momentary equilibrium. This does not necessarily mean your trade has failed and that you should exit. The longer it remains though at this state the worse it is for the bulls since they can't build enough momentum to drive the price back up (assuming the line break in your scenario was in continuation with the trend).

As a side....let me add that as you become more comfortable with the process trust your intuition. Sometimes you may not have a good reason for cutting it loose other than something just doesn't seem right. Go with the concrete information first, but don't sell our intuition short in the process. Trader intuition is not a bad thing.