Should You Keep Your Trade Open Over The Weekend
If you are wondering if you should keep your trades open over the weekend, a quick answer to that would be a No.
Why not you may ask? Explanation and illustration below and you make your own decision.
Why shouldn’t you keep your traders open over the weekend?
The reason is because, you never know what is going to happen over the weekend around the world and what kind of event can lead to the sudden drop of one currency. There could be some natural disaster that perhaps wipe out a city, or some guy decides to fire a nuke and start a war or there could be an outbreak of some new virus, the list goes on. Of course these are drastic examples.
Of course there are different school of thoughts on this because some will ask you, what strategy are you trading?
Are you a day trader? If you are one, then you should close your trade.
If you are a position trader, then you should keep your trade since your stop loss (SL) and take profit (TP) may still be far away and chances of any event over the weekend are unlikely to be that catastrophic to take out your position.
However, take a look at the recent event in Cyprus about the controversial plan by the Cypriot government to skim €5.8bn from savers’ bank accounts to help in their bailout. That alone cause the Euro dollar to plunge over the weekend resulting in a Monday morning gap for quite a few currency pairs.
The EURUSD has a nice setup in H4 where the price broke the downtrend and was on it’s way up. My setup would be as per chart below.
As you can see, it was going up in nice profit of pips and assuming the trade was left open because it has not come close to the take profit price of 1.3137 thus the trade would still have been left open at Friday’s New York close.
Depending on different individual, the stop loss could be set somewhere around the last support level of 1.2994.
Or the stop loss at the lower support around 1.2910
But can you see what happened on Monday when the market open after Cyprus government controversial decision over the weekend? The price gap down and open at 1.29025.
Do you know that in such an event, when the price has dropped below my stop loss, open position would be closed at the closest price that matches your stop loss. So lets say the trade closed at the Monday’s open price of 1.2902 and the open trade over the weekend was close at that price.
Lets assume stop loss was at the last support level of 1.2994, that would mean trade close on Monday open at a loss of an additional 92pips instead of the stop loss level of 1.2994
If the stop loss was placed at the last support of 1.2910, then the additional loss would be just 8 pips.
Only EURUSD is shown as an example here, other currency paired with the Euro suffered the same fate. What happens if you have multiple trade open over the weekend and they are all against you? Your losses could be massive due to the Monday morning gap and you have to pay up for those losses incurred if for some reason, all the closed trade resulted in your account going negative.
However, if you have open trades and the Monday morning price gap in your favor, you could gain more pips than your take profit level and that would certainly put a nice smile to your face but certainly not if they were against you.
So Should You Keep Your Trades Open Over The Weekend?
The choice is yours. You can either close your trade and re-enter again on Monday or you can opt to keep your trades open if you think you can withstand any losses that hits you if the Monday morning price gap against you.
Good luck and safe trading!