Hedging occurs when a transaction is entered to reduce exposure to a prior trade turning against you and eliminating profits or increasing losses. Hedging is done to decrease the risks and hold a position until the markets begin to move in the original trade’s favored direction.
Just like finding entries, it is even more important finding exits.
It is especially important in the case a Day-trade turns into a swing trade.
Swing trades usually carry much smaller size because the stop-levels are much wider.
Using the same size on a much wider stop would massively increase the risk of the trade.
As seen in the picture below, the blue line is a support from a larger time frame, so the possibility that price may bounce there is very high. There is a chance that the bounce may completely eliminate the gains made.
Taking profits out at this point would be a wise choice.
However, we expect the price to fall even more and turn this day-trade into a longer lasting Swing-trade.
We could then:
What can we do next?
What if there is no breakout?
The loss of one position will be the gain of the other.