More often than not, your trades are going to close out from either your stop loss or target being hit. However, there is the odd occasion where you will need to make a decision on whether you should exit a trade or hold onto it.
Holding a trade over the weekend is one of those difficult scenarios where you will have to make such a decision.
This question is one I receive quite a lot and in this post I am going to break down the process I go through.
Before we dive in, you need to know that there is no single answer – your judgement is going to be the key to unlocking the answer. Price action thrives from flexibility and it applies to this topic as well.
There are two distinct sets of questions that you should run through when tackling this problem. The questions make up a “State of the Trade” and a “State of the Mind” that you will need to assess.
State of the Trade
The first set of questions analyse the trade itself. I ask these first because if any of them are negative answers, I don’t need to figure out the “State of the Mind” questions. Efficiency is useful in trading – don’t make more work for yourself!
Ask yourself these questions:
- What kind of trader am I?
- What is the overall trend?
- Where is price in relation to my stop loss and target profit?
- Is there any big news over the weekend?
Let’s break each question down.
What Kind of Trader Are You?
The first question is a simple yet vital one.
If you are a scalper it’s a simple answer: you shouldn’t hold the trade. The forex market is 24/5 – you can’t exit your trade over the weekend so you have to hold the trade until the market re-opens.
Scalpers don’t stay in trades for very long so you definitely don’t want to hold over a weekend.
A similar question you can ask is “what time frame am I trading on?”. If you are on a lower time frame, you are less likely to hold your trade over the weekend for the same reasons.
If, however, you are trading on the daily, weekly, or monthly, your answer to holding the trade is one step closer toward being a yes.
Now, that doesn’t mean if you are trading on higher time frames that you blindly hold trades over the weekend. There are more questions to ask.
What is the Overall Trend?
Ask yourself what the overall trend is for the pair you are trading.
This is extremely relevant because if you are going against the trend you are taking on more risk.
Due to the forex market being 24/5, it creates gaps in price when the market opens again. Often enough this gap will be in favour of the trend.
Obviously this is not guaranteed but in regards to managing your risk, it is an important consideration.
You are opening yourself up to more risk by holding a trade over the weekend that goes against the overall trend.
Context is important though. So I often find myself asking that question alongside the next one…
Where is price in relation to my Stop Loss and my Target?
If you are already in the negative with your trade it is best to not hold it over the weekend. Cut your losses and move onto the next trade!
Now, if price is close to your target you should also look to close the trade. One of the key lessons I try to teach is to not let greed manage your trades.
Don’t be greedy – it will lose you money!
The sweet spot with these questions is your judgement of the trade and the state it is in.
If price has been consistently moving toward your target and is with the trend, you can look to hold it over the weekend. Your risk of price going against you is reduced in this scenario.
Practice makes perfect with this stuff though – each trade will have different factors that influence your decision.
One of those will be news.
Is There Big News Over the Weekend?
If there is a big news event over the weekend, you shouldn’t hold a trade through it. This is more common sense than anything else.
Any big news events are something you should be aware of trading through. Combine that with a weekend and you can get yourself into a tricky situation.
You can’t exit a trade over the weekend so you are locked in until the market re-opens.
So it’s important you check for any big news that could impact price
All of these questions together give you an idea of the State of the Trade that will help you make the best informed decision that you can.
Your judgement as a trader will be pivotal when deciding to hold trades over the weekend. You will get better with practice so don’t be afraid to take these trades on a demo account.
Logging the data will be helpful! But wait – there are still a few more questions you need to ask yourself…
State of the Mind
Alright, so you have looked at the trade and analysed it thoroughly. You are close to deciding on whether you should hold the trade – let’s take a look at the last few questions you should ask.
These are all related to and affect your trading psychology. They are the last checks you make before you make a decision on holding a trade over the weekend.
Ask yourself:
- Have I got data to look back on in my trading journal?
- How does holding a trade over the weekend affect my trading psychology?
- Am I being greedy?
Do I Have Data in my Trading Journal?
The first question is crucial to your success with holding trades. Have you ever held a trade over the weekend and if you have, what do your previous results say?
Collecting and analysing your results is going to make you a more profitable trader because you’ll be making better informed decisions.
If you have never held a trade over a weekend, try it out on a demo account. You don’t need to lose money through trying out new things.
Collecting data in your journal will give you peace of mind and confidence when trying to decide on holding a trade.
You can still use your live account if you wish – just be certain to log the data so that you can check out your results when you come up against the same dilemma!
How Does Holding a Trade Affect My Psychology?
The second question is much more personal to yourself and your trading psychology.
If you find that you can’t stop thinking about your trade over the weekend, perhaps it is better you don’t hold your trades.
Peace of mind shouldn’t be undervalued in trading – it has a roll-on effect that can impact your future trades. If you are stressed by holding trades then you should practice first on a demo account.
If holding a trade impacts your psychology in a negative way then you simply shouldn’t hold it on a live account. Your trading psychology is something you need to dedicate time to improving. Just try a few holds on a demo account first if need be!
It isn’t necessary for you to lose money when trying out new things. Give yourself time to practice if you need it – there’s no rush!
Am I Being Greedy?
The last question is the most important.
I have spent a lot of my time teaching the importance of not letting greed dictate your trading. More often than not, it will cause you to lose trades and this is no exception.
If you are currently at a 3 RR and want to get to 4 RR, take a moment to ask yourself whether you are being greedy.
The weekend movement can completely wipe out profits. If you let your greed control your weekend trades you are playing a dangerous game.
You have to be critical of yourself because no one else can do it for you in trading.
But if you can truthfully say that you are not holding a trade for greedy reasons, you are in a great position!
So, that sums up the questions I ask when I look to hold trades over the weekend. Flexibility and judgement are going to play a big part in your decision making with this.
Each trade is going to be different, as well as the external influences such as news or speeches. I definitely encourage you all to try holding some trades over the weekend. Every trader is different – I don’t hold trades over weekend very often but a lot of my students do.
It’s worth practicing for a bit of time – you never know what you will succeed at if you never try!
Practice really does help with this area of trading. The earlier you start, the easier and more profitable you will make it for yourself in the long run!