How do you set a stop-loss in pair trading? 🛑
🔹 A stop-loss is a pre-set condition to exit a trade when facing a loss.
🔹 In pair trading, the stop-loss applies to the entire trade as a whole, not just to one leg.
🔹 Closing only one leg leaves you with a regular directional position that you never planned for.
🔹 Define your exit conditions before entering, as making calm decisions during a loss is much harder.
For example, you decide in advance that when your total loss limit on the pair is reached, both legs close together. When the moment comes, you stick to the plan instead of arguing with it.
⚠️ Common mistake: closing the losing leg and leaving the second one "for luck," turning your trade into a random directional bet.
Do you close both legs at the same time, and why?
#Futures #CryptoTrading #CryptoEducation #RiskManagement
🔹 A stop-loss is a pre-set condition to exit a trade when facing a loss.
🔹 In pair trading, the stop-loss applies to the entire trade as a whole, not just to one leg.
🔹 Closing only one leg leaves you with a regular directional position that you never planned for.
🔹 Define your exit conditions before entering, as making calm decisions during a loss is much harder.
For example, you decide in advance that when your total loss limit on the pair is reached, both legs close together. When the moment comes, you stick to the plan instead of arguing with it.
⚠️ Common mistake: closing the losing leg and leaving the second one "for luck," turning your trade into a random directional bet.
Do you close both legs at the same time, and why?
#Futures #CryptoTrading #CryptoEducation #RiskManagement