Should you close a Trade before the Take Profit level?

Should you close a Trade before the Take Profit level?

Should you close a Trade before the Take Profit level? 300 169 Minimalist Trading – Best Trading Indicators for TradingView

Deciding where to set the Take Profit level is often difficult.

But even if you set it right, many emotions during a trade make you question whether you should close the trade before the Take Profit level.

Luckily, there’s one simple general rule that always works.

In fact, if you believe that your technical analysis is correct, the price will ultimately reach the Take Profit level.

In today’s trading opportunity that we discuss below, after doing some technical analysis on our TradingView chart, we identify a clear sell opportunity.

However, almost halfway into the trade, some contrary signals appear.

Emotions start to suggest that we should close the trade.

But we do not, because we trust the indicators, and we trust the technical analysis that we made with them.

Trade setup – 16 Jul 2018

Should you close a trade before reaching the target? Setup 1

This setup is very clear. In particular, we have:

    1. A significant divergence between the price (which goes up) and the RSI Exhaustion (which goes down)
    2. Bullish exhaustion in the RSI Exhaustion (it’s colored green)
    3. A confirmed top (always wait for the close of the next candle for confirmation)

Since the above three conditions are met, we place our order with stop loss a bit higher than the most recent highest level, and target all the way down to the major support displayed by the Levels and Zones.

Trade update – 16 Jul 2018

Should you close a trade before reaching the target? Setup 2

The price is still pretty much at the same level and we got yet another top.

We can see this formation as one single top, but the general idea is that we now have even more confirmation of our chart analysis.

Trade update – 16 Jul 2018

Should you close a trade before reaching the target? Setup 3

The price is now moving lower and the RSI Exhaustion is dropping like crazy which should indicate a further downward movement in the price.

That said, our target is still far away so we must stay rational and patient.

Trade update – 16 Jul 2018

Should you close a trade before reaching the target? Setup 4

The price is now halfway into the target and, since we like to trade safely, we move the stop loss to breakeven so that, starting from now, we’re in a risk-free trade and in the worst case we will earn a tiny profit.

Trade update – 17 Jul 2018

Should you close a trade before reaching the target? Setup 5

We got a couple of bottoms, but now the price has moved lower.

The bottoms were valid and the RSI Exhaustion was diverging and it was exhausted.

However, the setup was very tiny which is usually not enough for a major movement to take place.

In fact, even in this case, such a tiny setup didn’t have the force to push the price higher.

Moreover, since we are at breakeven, we maintained the trade open, and it looks like that now the price has restarted its downward movement.

Trade closed – 17 Jul 2018

Should you close a trade before reaching the target? Setup 6

Towards the end, the price just accelerated and moved very impulsively all the way down to our target allowing us to close the trade with a win and a more than 4x profit.

The trade gave us the opportunity to reflect on a situation that happens rather frequently, which is receiving contrary signals while the trade is still open.

So the question is legitimate: should you close a trade before reaching the Take Profit level?

In this case, we didn’t, but under other circumstances, it could be the best way to go.

The key thing is that you should always trust your indicators and the technical analysis that you make with them.

By doing so you can always be prepared to handle any situation correctly.

But what about you!

Do you always stick to your analysis or do you end up closing your trades too early?

Feel free to share how you handle your trades by leaving a comment on the YouTube video above!