Avoid negative open equity

Discussion in 'Strategy Development' started by Joe Ross, Mar 11, 2004.

  1. This article was contributed by Joe Ross www.tradingeducators.com

    Avoid negative open equity

    There is an old saying that when day trading positions have had negative open equity most of the day, and an opportunity arises to exit the market at break even with less than 30 minutes of trading rises, go ahead and exit the market.

    Unless the market is moving rapidly in your direction with expanding-in-length bars, and no more than 5 minutes left, exit immediately and consider the opportunity to exit a gift. Day traders are limited by the number of minutes that exist in a trading day and their profit objectives must take this fact into account before trade initiation. It should be extremely rare for you to initiate a day trade with less than fifteen minutes to go before the Close.

    Better yet, is to make it a rule to never ride a position having negative open equity. Unless you like to suffer, there is no point in holding a losing position for very long.

    Best bet is to exit losing positions as soon as possible, and wait for a more opportune time to reenter the market.

    It is so important to learn to quickly jump out of losing positions. It is also extremely important to learn to take something out of a position as soon as you are able. We have had 3 trades in the past two days that made money only because we took something out while we were able. Better something than nothing, and better breakeven than experience a loss. If you sit on losers, you are bound to have them.

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