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Generally, it’s very risky to hold day trades overnight. Even with a losing trade, it’s usually better to close out and start fresh with new trades the next day.

The trading session for day traders typically includes only buying and selling stocks, currencies, and futures. Market closure is typically reached before these traders complete their trades. It is, therefore, important to think carefully before holding positions overnight. This article will take a closer look at overnight positions. 

What is an Overnight Position?

A forex position or a futures position that has not been closed by the end of the regular business day is an overnight position. It is possible to carry out these trades overnight and trade the following day. As soon as the regular trading day closes, traders take overnight positions at risk of adverse movements. Long-term investors usually hold overnight positions, while day traders do not normally hold overnight positions. 

What to consider before holding a position overnight?

The factors influencing various markets (stocks, forex, futures) differ. Risk management, cost of holding positions, leverage changes, and reasons for holding positions overnight must all be considered.

Trading overnight is generally done to increase profits, reduce losses, or turn profitable the next day.

Traders who succeed clearly understand when to trade, when to profit, and when to lose. There are usually three stop orders: trailing stops, take profits, and stop orders.

Manually closing positions are performed if some orders are not closed at the end of the trading session. The risk of holding a position overnight increases, and new variables that weren’t considered when placing the order become involved. 

Hold a Position Overnight or Not?

Others aren’t concerned about closing orders before a trading day ends due to the fear of a market reversal. Profits should be waited for before losses can be stopped.

Ideally, the remaining order would still follow the general trend the following day. It will be a tragedy if the order has already been lost or your account has been stopped out directly the next day. For this reason, many traders are wary of taking overnight positions, regardless of whether they are keen on taking short-term or long-term positions.

As a result of the time difference between internal and external trading, currency traders face a higher risk of holding positions overnight; however, some unpredictable risk events or unexpected data results that may occur overnight may also make it difficult for them to hold positions overnight.

As an example, let’s look at EURUSD. Suppose you hold an overnight EURUSD long order, and the international market releases important data in the middle of the night (with a time difference from the domestic market). In that case, the EUROUSD is likely to turn out to be at a loss when the market opens the next morning.

Day traders tend to think day trading is safer because of this possibility of risk. Still, it is also easier to fail due to frequent trading. Many trend traders, especially those with unstable personalities and immature trading systems, turn to short-term day trading or sell their positions early, only to miss the big market gains. 

How to Control the Risk of Holding a Position Overnight?

You must learn to hold positions overnight to control orders’ risks. A real trader needs methods and skills to hold a position overnight. It is generally best to hold a position overnight if it meets the following five conditions:

  • Positions are profitable

A slight drop of more than ten points will affect your position if it has floated to 50 or 60 points profits. 

  • The general trend is good

There is a great deal of importance here! This is very likely to fail when you hold a long order overnight on a short market or a long order on an extended market.

  • Set a stop loss

Limit losses by placing protective stop-loss orders.

  • The quantity and price should be matched.

You must match your deal price and volume during the evening session while remaining strong.

  • Don’t hold all positions overnight.

Overnight positions must not be held overnight, and various money management essentials must be followed during transactions. No one knows when the market will change since it is unpredictable.

Making money through forex speculation isn’t easy. To ensure their success rate and profit probability, investors must master the key points and skills in time.

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