I want to talk about open position management and how to manage open positions this week. We found a trading opportunity and executed a trade. Should we just leave the take profit and stop levels as they are or should we adjust them according to price action?
I will try to explain how I have adjusted it according to the changing price action while I have an open position below. Everyone can have different methods of managing open positions. This is just an example of how I implement open position management.
We opened the trading position on Friday with the Gartley formation at AUDUSD. Just before the price reached our entry level, we have entered the buying order as shown in the graphic on the side. 0.7902 entry level, 0.7852 stops, 0.7964 first profit taking and 0.8002 second profit taking.
Although the reaction came from the buying level and the price went up, the markets closed before reaching the level of the first profit taking. With the opening of the markets today, I adjusted the new levels as below.
As seen in the chart above, the profit taking levels have been changed. I wrote in the beginning of last week that a Gartley formation could be formed. When we first entered the trade, we determined the levels with the classic Gartley Formation Strategy. However, the price respected the level of support / resistance shown in red above throughout the week. Every time the price came to this level, there was a war between the bulls and the bears, and once again the importance of the markets to these levels proved.
For this reason, it is a great risk to keep the first take profit level above this level when the price is below this level. Because,most probably the price might return from this level before reaching our take profit level and hit our stop loss level. The new first position profit taking level is thus 0.7955 and the second profit taking level is 0.7997. These levels also correspond to the fibonacci levels of 38.2% and 61.80% of the orange price move in the above chart.
The price may reach the level of 0.7923, the trade is still open, the profit taking level, or it may reach to the stop level first and to close the position with the loss. What is important, however, is that we must have a specific open position management strategy. If you manage position according to price action, you will be better off.