Christmas is a time for giving but not for giving your profits away

Author: Ryan Littlestone | Category: Education

How will you protect your positions over the holiday period?

It's that time of year again when we all get an extended break to recharge the batteries and spend some well earned time with family. For most of you, I'd hope that you'll be closing out your trades, switching the screens off and taking the chance for some good R&R.

But for those of you who will be running positions over the holiday period, are you making sure that you have your trades covered appropriately? After all, markets are open for a few days next week and if this year has shown us one thing, it's that unexpected damage can be done at any time. It was nearly a year ago that we returned from the holiday period to find ourselves slap bang in the middle of a crash in China. In the not too distant past was the pound flash crash also.

We can't do anything to control these events when they occur but we do have the ability to control our trades and protect ourselves as much as possible.

So if you are running open positions, see what protection you can apply. If you can get guaranteed stops from your broker then look to put them in place, even if it costs you a few pips. You'd rather pay few pips now than find yourself hundreds down when it could have been avoided.

If you can't get guaranteed stops, at least look to have what I call 'disaster stops'. These are stops I often put in place to protect me from any major events, and I usually place them well outside of any normal or longer-term ranges or levels. The reason for that is that at any time we could get a minor flash crash or something much worse. Disaster stops may not be that helpful in things like flash crashes where a price my return to where it moved from, and meanwhile it's taken out your stop on the way but if you have no stop and your broker stops you out at a bottom or top of a big move that wipes your account, you'll wish you had put one in.

And if there is some other big long-lasting event, I'd still rather my disaster stop gets hit and lose half my account, than have none and lose all of it.

It's not possible to cover every possible negative scenario so it's an exercise in damage limitation. Trading always is, no matter when you do it.

If you have any strategies you want to share in how you protect your trades, either over the holiday period, or trading in general, feel free to let us and your fellow traders know. Also, if anyone needs some advice on how best cover themselves properly, feel free to ask in the comments also.

Stay safe boys and girls and for those who may be finishing up trading now or shortly, I wish you a safe and Happy Christmas/holiday to you and you families.