Overstay refers to a situation where a trader has held on to a position for too long. This means he or she has missed the optimum time to sell for the maximum profits and now must sell for less profit or even a loss. Fear of missing out on bigger profits causes many traders to overstay.
In trading, timing the sell is of equal importance to timing the buy. Successful trading depends on the ability to correctly identify a trend, follow it up (or down) and close the position before the trend reverses. Traders don’t want to jump out to early on false signs like a one-half retracement, but overstaying can be just as damaging to their profits. For this reason, most traders have strict exit criteria that sets out a rule-based method for closing out positions.
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