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Not everyone knows that you can close part of a trade and let the other part keep on running. I use this approach in Metatrader. If you use other trading software, you should check manual.
So how to close part of the trade? It is simple. First, from open trades select trade you want to modify. Right click on it and click Modify or Delete Order:
Next you will see popup with options. Make sure that Type is set to Market Execution. In Volume line select size of position you want to close. You can see in the example that I have 2.0 lots open on Germany 30 Index Cash and I want to close half of it so I set volume to 1.0. Next, click yellow Close button at the bottom.
This way you can close part of your trade and left the other part open.
Why you should use partial close?
Every experienced trader will tell you that profit on your open position is only virtual. Only when you close a trade and book profit then you can say that you made X dollars on that trade. There are many situations when market can turn around in split of seconds. If you trade longer than few months, then you probably saw flash crashes or some other strong moves. If market goes against you from nice temporary profit you can have a loss.
With partial close you can have better control with money management and position sizing. Next, I show you some examples when you can use partial close.
Partial close and stop loss
When you close part of your trade then you have some part left open. So, you book some profit, but what about this open part? Where is your stop loss? It is always a good idea to move your stop loss to the entry point. That way if something goes wrong with that open part then you won’t lose money.
When you can use partial close?
Of course, in most cases it will be when you are profitable. You are not sure if this is an end of a move but you want to book some profit.
There are many situations when you can close part of your trade. Some examples below.
Long term trading
In long term trading you keep your trade open so long as you can.
You may see signals that trend is getting weaker. Maybe price has problems with some resistance area and there is a range move. Or price is approaching very important level. When you have nice profit on your current trade it is a good idea to close part of it. You can always reenter trade on correction move.
Resistance areas and trend reversals
There are levels which are very important for traders. It may be some pivot line or resistance line based on price history. Let’s say that traders are long. When trade is in profit, they set take profit (TP) order on R2 line.
We also have trading robots. Programmers know that around R2 line we can expect some sell-off because of TP orders. They program robots to go short from that level for short time of period.
This way we can see some rapid price actions near important levels.
If we are in profit and see that price is getting closer to such area, we can close part of trade here.
What if trend is strong and price can go to R3 line? When we use Pivots we have few support and resistance lines. Same thing with Fibonacci – there are few extension lines where traders can close their trades. In these cases, we can use partial close.
Let’s check the example chart below and discuss this situation.
On chart, you can see Fibonacci retracement and extension lines. We open short position, 2 lots on EUR/USD. Everything goes well, there is a strong move down. We know from our experience that 161.8% is often target for TP orders. Still, move is strong and we have another good target at 200% extension line. The best way to handle this situation is to close part of trade at 161.8% extension. Next, we move stop loss to the entry point – that way even if price suddenly go back we won’t lose any money. Last thing to do is to set take profit target for 200% extension line.
Of course, you can trade with other system. I use Fibonacci in example but you can have few targets based on trend lines or Pivot lines or some other trading technique. The most important thing here to remember is that you can manage your trade. With partial close you can protect your profit. When you change your stop loss to the entry point, you make sure that you won’t lose money. And part of the trade which is left open – sometimes it will work out, sometimes not.