How long should you hold a stock trade and what influences it?
According to the regulations of most brokerage companies, the duration of an open transaction can currently range from a couple of minutes to infinity.
But the goal of any trader is not to set a record for the duration of a transaction, but to obtain the maximum possible profit.
Therefore, many beginners have a very reasonable question: how long should they hold trades when trading Forex or another market?
It can be very frustrating when you close a losing position that could have turned into a profitable one in just a couple of minutes.
The question is not a simple one, and the answer depends on factors such as the size of the deposit, the trading asset, and the market situation.
Deposit size – if your deposit is less than $10,000, you shouldn't get carried away with long-term trading. Day trading is your best bet.
Imagine you have a $1,000 deposit and open a buy trade on the EURUSD pair, which has only appreciated by 3% in a month. Even with 1:10 leverage, the resulting profit won't impress anyone. Furthermore, you'll have to subtract the swap fee charged for rolling over the trades from your profit.
It's a different story if you use $1,000 to make frequent intraday trades with high leverage. With this strategy, you can earn much more.
Trading asset – very often the trading asset itself imposes restrictions on the duration of an open position.
For example, with futures, your trade will be forcibly closed as soon as the futures contract . Therefore, when planning futures trades, it's important to take this into account or use so-called " glued futures ."
The fee for carrying positions over to the next day also plays a significant role; for some assets, it can be quite significant, and the use of leverage only increases the swap size relative to the trader's deposit.
The market situation is the most important aspect when planning the duration of transactions.
Here, technical analysis indicators such as support and resistance lines, price minimums and maximums play a key role.
This means that it is better to close buy trades at resistance lines and price highs, and sell trades at support lines and price lows.
Or, at least, lock in profits as you approach these points using a trailing stop or moving your stop loss to the break-even zone.
When it comes to losing trades, long positions should be closed when the price breaks through the support line, and short positions when the price breaks through the resistance line.
At the same time, the size of the transaction should be planned taking these levels into account, so that later it does not turn out that after closing a long transaction when the support line is broken, you find yourself with a loss of 30% of the deposit.
Well, the most important point is that when planning a new transaction, you need to determine the amount of loss, upon reaching which this transaction will be closed.
My personal experience shows that a losing trade rarely turns into a profitable one; more often than not, the loss is so large that you have to close the position anyway. Therefore, it's best not to delay closing losing trades. At the same time, you can hold on to a profitable trade for quite a long time, constantly locking in any profits.
Theoretically, it's quite difficult to determine the optimal holding time for a stock exchange trade. The most effective way to develop the right strategy is to practice on a demo account , taking into account the above parameters and the size of your deposit.
