Opening a Trade or Taking a Position

You may think that there is no difference in the above. But although the statement might seem at best, subtle. There is actually a big difference in them both.

Opening a Trade

Opening a trade is exactly that. Let us say that you have a MACD signal and that you now need to open a spread bet on IG.

So you login to the IG platform and go long the USD/CAD

You do not consider any other factors in opening this trade.

You are not concerned with support and resistance levels.

Nor are you influenced by news or any other outside factor.

You are only interested in opening a trade.

Winning and Losing

The trade you have opened may win or lose… who really knows.

The point is this. Just opening a trade if you are new to trading can be a risky mind game.

You could be opening the trade just when it is about to correct, retract or consolidate.

As a new trader, seeing your losses spiral can cause you all sorts of frustrations. Even if the trend and trade you have opened is correct long term. The short term losses can affect your judgement.

You could close your trade to soon or even get stopped out if using the wrong stop loss strategy.

A Better Approach

To create the best chance of winning at trading and more importantly winning the mind game that trading is. It is probably better for new traders to take a position rather than just open a trade.

Let me explain.

Taking a position

When you take a position, you are aware of support and resistance areas. You understand the importance of candle patterns.

You are looking for the best possible entry point even after you have had a signal from an indicator/s you may use.

Look at this chart beneath.

opening a trade

You can see that the USDCHF has given us a MACD  crossover signal in February [red arrow].

Now if a new trader had taken this, they may well have been panicked out of the trade by the ensuing retracement or have been stopped out, depending or their stop strategy.

A smarter way to trade this signal is to wait for price correction and a valid candle pattern to signal an entry point.

If you had seen the MACD crossover and used this as the first identification to go long, you could have then waited a few weeks for the price action [blue arrow] to break resistance levels and then enter.

In fact, it is after this price action that the price really starts to move.

[A more seasoned trader can and will enter the trade accepting the huge ups and downs before her trade goes into profit.]

So instead of just entering the trade after a technical indicator signal, look for some price action too.

This little technique can save lots of trading heartache, losing trades and stop outs.

So just remember… After a trading indicator signal, wait for valid price action. This can stack the blocks firmly in your favour to more winning trades overall.