Repair Techniques

It’s not often that a trade goes exactly the way you planned from start to finish. So what happens when you’ve got to make adjustments on the fly? Repair strategies become paramount. We get plenty of questions about what to do with a trade once support or resistance has been broken, or once the basic assumption is proven incorrect. 

The first thing you’ve got to understand is that a “repair” trade is really just another trade - a totally different entity that you’ve got to manage just like any other trade. The idea of a repair is that you’re adjusting an existing, losing, position, but in reality you’re moving from one trade to another, with all the new risks, rewards, and assumptions that go with it. 

With this in mind, ask yourself a few questions before deciding to “adjust” an existing trade: 

1) Is this trade so near max loss, or so near expiration, that it’s going to be very expensive to do anything with it? 

2) Do I want to keep adding to a position that I’m already down on? 

3) Are there better places to put my time, money, and attention? 

If the answers aren’t perfectly clear, take some time to think about this before adjusting a position. Being a good trader is about taking your losses with the same rigor and analysis that you use when you take your gains, and doing your best to remove emotion from the equation. If a trade’s got you bummed, and you’re having trouble focusing on the rest of your account, it’s probably better to close the position (or at least enough to make it substantially smaller) so you can return your focus to the trades still in play. 

Whatever your trade, make sure you understand the new risks and potential rewards you’re taking when you start making changes. Some of the biggest losses we’ve seen customers take have been from making changes to existing positions that drastically changed risk/reward scenarios. As with all your new trades, be aware of what you’re doing before you do it!