Chapter 14

Pulling the Trigger

In This Chapter

Opening up trading positions

Averaging into trade setups

Trading on breakouts

Dealing online and placing orders

“You gotta be in it to win it” is a favorite saying that currency traders like to throw around. The “in it” part refers to being “in” the market, having the right directional view expressed with an open position (long/short) in a currency pair.

But there’s always a trade-off between having the right position and getting into that position at the most advantageous price. For example, being short AUD/USD may be the correct position to have, but if you enter at the wrong price, you may have to endure some pain before the trade moves your way.

In this chapter, we walk you through some of the different ways of entering trades and establishing the position to fit your overall strategy.

Getting into the Position

You can make trades in the forex market one of two ways: You can trade at the market, or the current price, using the click-and-deal feature of your broker’s platform; or you can employ orders, such as limit orders and if/then contingent orders. (We discuss order types in Chapter 4.) But there’s a lot more to it than that. Certain trade setups suggest a combination of both methods for entering a position, while others rely strictly on orders to capture rapid or unexpected price movements. Then there’s the fine art of timing the market to get in at the best price at the moment.

Buying and selling at the current market

Many traders like the idea of opening a position by trading at the market as opposed to leaving an order that may or may not be executed. They prefer the certainty of knowing that they’re in the market. Actively buying and selling is also what makes trading as fun and exhilarating as it is hard work.

Deciding whether to enter now (at the market) or wait for better price levels (using orders) depends greatly on the nature of your strategy. If you’re aiming to trade short term (minutes/hours) on news or economic data reports, for instance, you’re going to be trading mostly at the market. If you’re looking to position for a larger price adjustment over the next day(s), you’re better off using orders to execute your market entry.

For short-term trade entry at the market, you want a good handle on the recent price action, which means knowing where prices have been over the past several hours. Just because you’ve settled on a strategy to buy USD/CAD doesn’t mean you have to close your chart window, open your trading platform, and pay the offer.

Take a step back and look at shorter-term charts, such as 5 or 15 minutes, to get an idea of where prices have been trading recently. Chances are you’ll observe a relatively narrow range of price action, typically between 20 and 30 pips. Unless the situation is urgent, a little patience can go a long way toward improving your entry level. Why buy at 1.0550 when you have a viable chance to buy at 1.0535?

Let the routine price fluctuations work to your advantage by trying to buy on downticks and sell on upticks in line with your overall strategy. Selecting your trade size in advance helps — so when the price gets to your desired level, you need to click only once to execute the trade. You can also use limit orders to buy or sell just a few pips from the current market, letting the broker’s platform execute automatically in case the price moves are too quick to click and deal manually.

As you watch the price action, keep a disciplined entry price in mind, both in your favor and in case prices start to move away from your desired entry level. If the market cooperates and moves to your desired trade entry price, stay with your plan and make the trade. If prices move away from you, have a worst-case entry level in mind and be prepared to pull the trigger so you can still execute your overall strategy. You may not be able to enter at better prices every time, but we think you’ll be surprised how often you can.

Averaging into a position

Medium- and longer-term trade strategies typically benefit from averaging into a position. Averaging into a position refers to the practice of buying/selling at successively lower/higher prices to improve the average rate of the desired long/short position. The idea here is to allow larger market swings to unfold and use them to establish a larger position at better prices than current levels in anticipation that the market will eventually reverse course in line with your strategy.

Take a look at a detailed example of averaging into a position to see how it works. Imagine that the USD/JPY is moving lower from 82.20 on a weak U.S. economic release, but you think USD/JPY is unlikely to decline below 81.00, where the 200-day moving average is located.

One possible strategy would be to buy USD/JPY on the current weakness, spacing your buys so that you can buy as low as possible, but above 81.00 where you don’t expect it to trade. (The stop-loss exit in this example would be somewhere below 81.00.) Imagine that you buy one lot of USD/JPY at the market, now at 82.00, just so you have some piece of the position in case the market rebounds abruptly. You decide that 81.20 is another good level to buy at because it’s a margin of error above the key 81.00 level. If your order to buy at 81.20 is filled, you’ll be long two lots at an average price of 81.60 ([82.00 + 81.20] ÷ 2 = 81.60).

Take a look at what just happened there. To begin with, you were long one lot from 82.00. To add to the position at 81.20 means the market was trading lower, which also means you were looking at an unrealized loss of −80 pips on your initial position from 82.00. After you buy the second lot, your unrealized loss has not changed substantially (assuming that the market is still at 81.20 and excluding the spread, you’re still out −80 pips, now −40 pips on 2 lots), but your position size has just doubled, which means your risk has also just doubled.

If the market rebounds from 81.20, your unrealized loss will be reduced. But if the market continues to decline, your losses are going to be twice what they were had you not added on to your position. If your strategy plays out and the market reverses higher, you now have a larger position from a better entry price than if you had entered the two lot position earlier at higher levels.

We’ve seen the practice referred to as pyramiding in other trading books, and the advice is usually to avoid doing it (as in “Don’t pyramid into a losing position”). Sometimes “adding on” to winning positions is acceptable, such as after a technical level breaks in the direction of your trade. The result of adding on to winning positions, however, is a worse average rate for the overall position — a higher average long price or a lower average short price. If the market reverses after you add on, any gains in the overall trade can be quickly erased.

So what’s the deal? Should you average into positions or not? As with most questions on trading tactics, the answer is a straightforward “It depends.” Before deciding whether to average into positions, consider the following:

• Time frame of the trade: Short-term trades seek to exploit the immediate direction of the market. If you’re wrong on the direction in the first place, adding to the position at better rates will likely only compound your losses. For medium- and longer-term trades, averaging into a position can make sense if the trade setup anticipates a market reversal. (We talk about this a bit more in the “When averaging into a position makes sense” section, later in this chapter.)
• Account size: Depending on your account size, you may not have the capability to add to positions. You also need to keep in mind that adding to a position will further reduce your available margin, which reduces your cushion against adverse price movements, bringing you closer to liquidation due to insufficient margin. If that means trading smaller position sizes, such as 10,000 mini-lots, go with that.
• Volatility: If the overall market or the currency pair you’re trading is experiencing heightened volatility, averaging into trades is probably not a good idea. Increased volatility is usually symptomatic of uncertainty or fresh news hitting the market, both of which are prone to see more extreme directional price moves, in which case averaging is a losing proposition. In contrast, lower volatility conditions tend to favor range-trading environments, where averaging can be successful.

Signs that averaging into a trade is not a good idea

Many trading books recommend avoiding averaging into, or adding on to, a losing position — and with good reason. The tactic can lead to dramatically higher losses on smaller incremental price movements. Also, if you’re adding on to a losing position, you’re missing out on the current directional move. In other words, not only are you losing money, but you’re also not making money, which is the opportunity cost of averaging.

But that still doesn’t stop people from averaging into losing trades, even professional traders. Here are some indications that averaging is probably not a good idea:

• The market just blew through your stop-loss level. But you didn’t have a stop-loss order in place, so you’re still holding onto the losing position. First tactical error: Trading without an active stop-loss order. Second tactical error: Instead of exiting the position in line with your trade plan, you’re reluctant to take the larger loss than you initially reckoned with, so you decide to hold on to the position, hoping it will recover. This is usually the first wipeout on the slippery slope of relinquishing trading discipline. Save yourself some money and don’t commit a third tactical error by averaging into an even larger position (which you had already planned to be out of by that point anyway).
• The range just broke. You may have had great success in recent trades playing a range-bound market, and you’re in a position again based on that range. But ranges do break, and prices do move to new levels. Remember the basis for your trade — the range is going to hold — and don’t hang on, much less add on, to positions beyond your predetermined stop-loss exit level based on the range.
• News is out, but the currency pair is not responding the way it should. The news or data may be USD-positive, for example, but the dollar is coming under selling pressure anyway. Keep in mind that multiple cross-currents are at work at any given moment in the forex market. Sometimes they’re position related (a large hedge fund may be turning around a multibillion-dollar position); other times they’re based on news or information that is not widely known in the market, like a mergers-and-acquisitions (M&A) deal or a rumor. Remember: The market reaction to a news/data report is more important than the report itself. If you’ve taken a position based on the news, don’t second-guess the market reaction by adding on to the position if the market doesn’t respond the way you think the data indicates. Instead, accept that something else is going on and that the news you based your trade on is not it.

When averaging into a position makes sense

Depending on the trade setup, you may be entirely justified in averaging into a position. In fact, with some trade opportunities, you’ll be hoping to have the chance to average into the position at better rates, because if the trade setup is correct, you’ll want to have on as large a position as possible.

Even though we’re suggesting that certain trade opportunities warrant averaging into a position, we want to stress that you still need to identify the ultimate stop-loss exit point in every trade setup. In other words, you can average into a position as much as you want up to a certain point, but after that the trade setup is invalidated, and you need to exit the position.

The trade setups we’re referring to are those where a reversal is anticipated. Prices frequently move into counter-trend consolidation ranges, where prices move in the opposite direction of the primary trend for a time before the trend resumes. You may see signs of an impending reversal from daily candlestick patterns, such as a shooting star/hammer or a tweezers top/bottom. You may begin to suspect a reversal after a significant intraday spike reversal/rejection from key technical levels. The market may also be nearing important long-term trend-line support or resistance that suggests a medium-term bottom or top is close by.

What all these setups have in common is a price difference between current market levels and the ideal entry point based on the setup. For example, major daily trend-line resistance dating back six months may lie above in EUR/USD at 1.2960/70. Current market levels are well below at 1.2890, and there has been a spike rejection from an intraday test to 1.2930/35. Adding up these observations, we may justifiably conclude that the current market price is just below an area of major resistance, suggesting a short position as the overall way to proceed.

But we have no accurate way of predicting how much higher the market might trade, or even if it will, before the anticipated reversal lower takes place. The market could start moving directly lower from current levels. It could retest the spike highs seen earlier in the day, or it could make it all the way to test the key trend-line resistance before stalling. So where might we look to get short?

The answer is in that zone of resistance we just identified between current market levels and the daily trend-line resistance. This is where it makes sense to average into a trade to exploit the trade setup.

As an example of our own approach, we may not know how much higher the market will go, so we may be prepared to short a portion of the overall position at current market levels, in case the top has already been seen and prices move directly lower. We may also be prepared to sell remaining portion(s) of the position at successively higher levels, if the market allows it. We’ll save our last portion of the position for the trend-line resistance level in case it’s reached.

When considering where to leave your limit-entry orders to average into a trade, be aware of what your final average rate will be if all your orders are filled. The difference between that average rate and your stop-loss level multiplied by the total position size will give you the total amount you’re risking on the trade. (In Chapter 16, we look at the profit/loss implications of closing out a multiple lot position that was averaged into.)

Although there are no 100 percent accurate gauges to tell us how much higher the market is likely to trade, we can use short-term momentum studies — such as stochastic models, the Relative Strength Index (RSI), or Moving Average Convergence/Divergence (MACD) — to make an educated guess as to how much more upside potential there may be.

If hourly momentum studies have already topped out and crossed over to the downside, for example, the upside potential is likely more limited. This may argue for being more aggressive in establishing a short position, such as making the initial sale at current market levels and placing any additional limit orders to sell above at closer levels. But if hourly momentum studies are still moving higher, we can reasonably wait and look to sell at relatively higher levels using limit sell orders.

Averaging into a reversal setup requires that you’re able to buy/sell multiple lots over relatively large price zones, sometimes as much as 100 pips or more. Make sure that you have sufficient margin resources available before you start averaging into your overall position. Depending on the size of the buy/sell zone and your available margin balance, you may have to space your limit-entry orders farther apart or trade fewer lots overall.

It’s always a trade-off between being in the right position to catch the move and getting in at the best price possible. It’s quite frustrating to identify a potentially significant market reversal, leave a single limit-entry order, but then see the reversal take place without your order being filled. Averaging into the position starting at current prices is one way to make sure you’re on board for at least some of the move.

If the setup works out, you’ll have taken advantage of any favorable price moves the market has made, resulting in a better average rate on your position. If the setup fails, averaging into the position at successively better rates will cost less in the end than entering the whole position at the current market level.

Trading breakouts

A breakout or break refers to a price movement that moves beyond, or breaks out of, recent established trading ranges or price patterns captured with trend lines. Breakouts can occur in all time frames, from weeks and days on down to hours and minutes. The longer the time frame, the more significant the breakout in terms of the overall expected price movement that follows.

In the very short term, prices on a 15-minute chart may establish a trading range of 20 to 30 pips over several hours, for example. A breakout on such a short time scale might result in a 30- to 50-pip movement in a matter of minutes/hours. Daily trading ranges of 300 to 400 pips may see a breakout result in an initial 50- to 150-pip movement in subsequent hours, with more to come in following sessions.

There’s no real fixed ratio or scale for range breakouts; we’ve just given those examples above to give you an idea of the relative scales involved. To be sure, a breakout of a 15-minute range can lead to the break of an hourly range, which can lead to a breakout of a daily range.

Breakouts are important because they represent a shift in market thinking. Most trading theories start with the premise that the current price reflects all the known information on that market at the moment. But rather than settling on one price and stopping, markets tend to consolidate into a zone of prices, or a range, where relatively minor price fluctuations are simply noise in terms of the grand theories of market price behavior.

For a range to break, then, by definition something must have changed in the market’s thinking. And there’s only one thing that will change the market’s thinking: new information. New information can be anything from news and data to rumors or comments, down to the prices themselves. Many traders rely on price information as their primary source of decision-making information. If prices in USD/CHF have been capped by 1.0500 for the past four weeks, a price move above that level is new information and requires adjustments in the market.

The beauty of breakouts from an individual trader’s perspective is that you don’t necessarily need to know the reason for the breakout — just that prices have broken out. Of course, being aware of what’s going on and what news is driving the market always helps give you a leg up in anticipating and preparing for potential breakouts.

In terms of entering a position, breakouts frequently represent important signals to get in or out of positions. In that sense, they take a lot of the guesswork out of deciding where to enter or exit a position.

Identifying potential breakout levels

The first step in trading on a breakout is to identify where breakouts are likely to occur. Pinpointing likely breakout levels is most easily done by drawing trend lines that capture recent high/low price ranges. In many cases, these ranges will form a sideways or horizontal range of prices, where sellers have repeatedly emerged at the same level on the upside and buyers have regularly stepped in at the lower level. Horizontal ranges are mostly neutral in predicting which direction the break will occur.

Other ranges are going to form price patterns with sloping trend lines on the top and bottom, such as flags, pennants, wedges, and triangles. These patterns have more predictive capacity for the direction of the eventual breakout and even the distance of the breakout. (We review the most common patterns and what they imply in greater detail in Chapter 11.)

The time frame that you’re looking at will determine the overall significance of the breakout and go a long way toward determining whether you should make a trade based on it. Very short time frames (less than an hour) are going to have much less significance than a break of a four-hour range or a daily price pattern. The length of time that a price range or pattern has endured also gives you an idea of its significance. A break of a range that has formed over the past 48 hours is going to have less significance for price movements than the break of a range that has persisted for the past three weeks.

Trading breaks with stop-loss entry orders

After you’ve identified a likely breakout point, you can use a resting stop-loss entry order placed just beyond the breakout level to get into a position if a break occurs. To get long for a break to the upside, you would leave a stop-loss entry order to buy at a price just above the upper level of the range or pattern. To get short for a break lower, you would leave a stop-loss entry order to sell at a price just below the lower level of the range or pattern. Figure 14-1 is a chart showing EUR/USD and where stop-loss entry orders could be placed to trade breakouts.

The appeal of using stop-loss entry orders is that you’re able to trade the breakout without any further action on your part. Breakouts can occur in the blink of an eye. Just when you thought the upper range level was going to hold and prices started to drift off, for example, they’ll come roaring back and blow right through the breakout level.

Price moves like that can leave the most experienced traders caught like deer in the headlights. By the time they react, the break has already seen prices jump well beyond their desired entry level. Worse, by trying to trade at the market in a fast-moving breakout, you may miss your price and have to reenter the trade, by which time prices may have moved even farther in the direction of the break.

When placing a stop-loss entry order to trade a breakout level, be aware of any major data or news events that are coming up. If your stop-loss entry order is triggered as a result of a news event, the execution rate on the order could be subject to slippage, which may reduce much of the gains from getting in on the breakout. (We discuss slippage in Chapter 13.)

Trading the retest of a breakout level

The other way to trade a breakout is after the break has occurred. You may not have noticed the significance of a particular technical level, or you may not have left orders in overnight to exploit a break. You turn on your computer the next morning to discover that prices have jumped higher overnight and feel like you’ve missed the boat. But you may still get a chance to trade the breakout if prices return to re-test the breakout level.

A retest refers to prices reversing direction after a break and returning to the breakout level to see if it will hold. In the case of a break to the upside, for example, after the initial wave of buying has run its course, prices may stall and trigger very short-term profit-taking selling. The tendency is for prices to return to the breakout level, which should now act as support and attract buying interest.

You can use these retests to establish a position in the direction of the breakout, in this case getting long on the pullback. Figure 14-1 shows where you could have bought on the retest of the break higher in AUD/USD. Note that prices did not make it exactly back to the breakout level. When trying to get in on a retest, you may consider allowing for a margin of error in case the exact level is not retested. You could also consider using a strategy of averaging into a position, discussed earlier in this chapter, to establish a position on any pullbacks following a breakout. Here the averaging range would be between current prices and the break level.

Earlier we wrote that you may get the chance to buy/sell a retest of a breakout level. The reason is that not every breakout sees prices return to retest the break level. Some retests may retrace only a portion of the breakout move, stopping short of retesting the exact break level, which is typically a good sign that the break is for real and will continue. Other breakouts never look back and just keep going.

But to the extent that it’s a common-enough phenomenon, you still need to be aware of and anticipate that prices may return to the breakout level. From a technical perspective, if prices do retest the breakout level, and the level holds, it’s a strong sign that the breakout is valid, because market interest is entering there in the direction of the break.

Guarding against false breaks

Breakouts are relatively common events in currency trading, especially in the very short-term. But not every breakout is sustained. When prices break through key support or resistance levels, but then stop and reverse course and ultimately move back through the break level, it’s called a false break.

There’s no way to tell whether any given breakout is going to turn out to be a false break except in hindsight. To protect against false breaks (as well as maintaining trading discipline and sound risk management), you also need to follow up your stop-loss entry with a contingent stop-loss exit order to close out the position if the market reverses course.

Although there’s no surefire way to tell whether a breakout is a false break or a valid one that you should trade, a few points to keep in mind are:

• Time frame of the breakout level: The shorter the time frame you’re looking at, the greater the potential for a false break. The break of a price range on an hourly chart may trigger stop losses only from short-term intraday traders. But the break of a daily price range dating back several weeks is likely to spark greater interest from the market, especially systematic models.
• Significance of the price level: The more important the price level that’s broken, the more likely it is to provoke a market response and to be sustained. A break of a three-month daily trend line is more likely to trigger a market response than the break of recent hourly highs/lows.
• Duration of the break: The longer the breakout level is held, the more likely the breakout is to be valid. Many false breaks are reversed in a matter of minutes. An hourly closing price beyond the break level increases confidence that it’s a valid breakout, and a daily close beyond confirms it.
• Currency pair volatility: Relatively volatile currency pairs, such as GBP/USD and USD/CHF, are more prone to false breaks than others, especially in short-term time frames. Look for confirmation in bigger pairs, like EUR/USD and USD/JPY. If they’re pressing against similar price levels, the less-liquid pairs could be leading the way.
• Fundamental events and news: What’s the fundamental reason for the breakout? Did someone say something? Have major market expectations on monetary policy, for example, been disappointed or surprised? Sustained breakouts tend to have a fundamental catalyst behind them — a significant piece of news that has altered the market’s outlook. If the news is relatively minor or not entirely “new” news, it increases the chances it’s a false break.

Trading breakouts is a relatively aggressive trading strategy and is certainly not without risks. Until you’ve gained some experience in the forex market, you’re probably better off focusing only on breaks of levels identified by trend-line analysis in longer time frames, such as daily charts, or breaks of longer-term price levels, like daily or weekly highs/lows. They may not occur as frequently, but they’ll tend to be more reliable.

Making the Trade Correctly

When using an online trading platform, entering a position is as easy as making a few simple mouse clicks. At the same time, the simplicity and speed of online trading platforms make those simple mouse clicks a done deal that puts your trading capital at risk.

That’s why it’s important to understand from the get-go that any action you take on a trading platform is your responsibility. You may have meant to click Buy instead of Sell, but no one knows for sure except you.

If you do make a mistake, correct it as soon as you discover and confirm it. Don’t try to trade your way out of it. Don’t try to manage it. Don’t start rationalizing that it may work out anyway. No trader is error-proof, and you’re bound to make a mistake someday. Just cover the error and get your position back to what you want it to be. Covering errors immediately is one of the few hard-and-fast rules we subscribe to in trading any market.

Buying and selling online

We take you through the basic steps of making a trade online in Chapter 4, but here we aim to clue you in to some of the human and technical aspects common to online trading.

Most every online trading brokerage now provides for click-and-deal trade execution. Click and deal refers to trading on the current market price by clicking either the Buy button or the Sell button in the trading platform. Before you can click and deal, you have to:

1. Select the right currency pair.

   This may sound silly, but make sure you’ve selected the currency pair that you actually want to make a trade in. When the market gets hectic, and you’re switching between your charts and the trading platform, you could easily mistake EUR/USD for EUR/CHF if you’re not careful. This can also happen when different currency pairs are trading around similar price levels. If EUR/USD is trading at 30/33 and USD/JPY is trading at 31/34, it’s easy to home in on the price and overlook the big figures, which would tell you you’re in the wrong pair.

2. Select the correct trade amount.

   Make sure you’ve specified the correct amount you want to trade. Different platforms have different ways of inputting the trade amount. Some use radio buttons, others use scroll-down menus, and others allow you to type the amount manually. When the trading is fast and furious, make sure your selection has been properly registered on the platform. Some trading platforms allow you to customize your default trade sizes in advance, so you’re able to simply click and deal on the currency pair of your choice.

3. Double-check your selections.

   Remember: This is your money; be certain now or be sorry later. In case you think input errors can’t happen to you, think about the equity trader at a New York investment bank who meant to sell 10 million shares of a stock but ended up entering 10 billion. By the time the trade was stopped, the system had sold several hundred million shares. Ouch!

4. Click Buy or Sell.

   Be sure you know which side of the price you want to deal on. If you want to buy, you’ll need to click the higher price — the trading platform’s offer. If you want to sell, you’ll have to click the lower price — the platform’s bid. Most platforms have labeled the sides of the prices from the user’s perspective, so the bid side will be labeled Sell, and the offer side will be labeled Buy.

After you’ve clicked Buy or Sell, the trading platform will confirm whether your trade went through successfully, usually within a second or less. If your trade request went through, you’ll receive a confirmation from the platform. Double-check your position, and make sure it’s what you want it to be.

If the trading price changed before your request was received, you’ll receive a response indicating “trade failed,” “rates changed,” “price not available,” or something along those lines. You then need to repeat the steps to make another trade attempt.

Attempts to trade at the market can sometimes fail in very fast-moving markets when price are adjusting quickly, like after a data release or break of a key technical level or price point. Part of this stems from the latency effect of trading over the Internet, which refers to time lags between the platform price reaching your computer and your trade request reaching the platform’s server.

If you’re continually getting failed trade responses, it may be due to the speed of your Internet connection, which is preventing your trade requests from getting to the brokerage trading platform in a timely way or delaying the incoming prices you’re seeing so that they’re always behind the real market. For more on how to optimize your trading on your smartphone or tablet, turn to Chapter 4.

Whatever the outcome of your trade request, you need to be sure you’ve received a response from the trading platform. If you have not gotten a response back after more than a few seconds, you need to call your broker immediately and confirm the status of the trade request. The deal may have gone through, but confirmations may be delayed due to processor slowness. Or the trade may have never been received by the trading platform because your computer lost its Internet connection.

Placing your orders

Orders are critical trading tools in the forex market. Think of them as trades waiting to happen because that’s exactly what they are. If you enter an order, and subsequent price action triggers its execution, you’re in the market. So you need to be as careful as you are thorough, if not more so, when placing your orders in the market.

We go over the different types of orders and how they’re used in Chapter 4, and we look at the finer points of placing orders in Chapter 13. Here are some additional important tips to keep in mind when placing and managing your orders:

• Input your orders correctly. Make sure you’ve correctly specified the currency pair, order type, amount, and price. Most trading platforms are designed to reject an order that is obviously wrong, such as a stop-loss order to buy at a price below the current market, and will prompt you to correct it. But other errors, such as a wrong big figure on the order price, can be accepted and end up being your problem. Double-check your order after it has been accepted by the trading platform. If it’s wrong, edit it or cancel it and start again.
• Note the expiration of your orders. Order expirations are typically good-’til-cancelled (GTC), where the order remains active until you cancel it, or good until the end of the day (EOD), which means that the order automatically expires at the end of the trading day (5 p.m. Eastern time [ET]). If you had an intraday position with a stop-loss good until EOD, and you later decide to hold the position overnight, you’d need to revise the expiration. GTC orders will expire on some trading platforms after an extended period of time, such as 90 days, so be clear on your broker’s policy.
• Cancel unwanted orders. Some trading platforms allow orders to be associated with a position, meaning that the order will remain valid as long as the position is open. Such position orders will also usually adjust the order amount if you increase or reduce the associated position. Other orders are independent of positions, so even if you close out your position, the independent orders will remain active. Make sure you understand the difference between the two types, and remember to cancel any independent orders if you close the position they were based on, such as take profits, stop losses, or OCO.