In trading, whether it’s trading forex, stocks or cryptocurrencies, there are many risk management methods that can be used, one of which is partial close. This method is usually used when the market is predicted to move further or when the market is very volatile, so there is a possibility for the price to suddenly reverse.
What is Partial Close?
Partial close is closing part of the transaction from the whole transaction that we open. For example, we buy 1 lot on GBPUSD, then the buy position is profitable and reaches the level we expect. However, based on the analysis we did earlier, GBPUSD is expected to rise even higher. So, we close 0.5 lots of trades and hold the remaining 0.5 to make a bigger profit.
In doing partial close traders are free to use any proportion. It can be 50% closed and 50% held, it can be 70% closed and 30% held or any other proportion the trader wants. The point is that traders close some transactions and let the rest follow price movements.
Partial Close Purpose
Partial Close is generally done to avoid the risk of lost profits due to price reversal. Of course, we can also do a trailing stop instead of using a partial close. However, each person has their own reference, so they are free to choose to use a trailing stop or partial close.
Apart from that, partial closes are usually used when there is an opportunity for the price to move further. For example, in the case of a trending market, the price of an asset can move either bullish or bearish for days, weeks and even months. Therefore, a partial close is actually an attempt to try to follow the trend’s price movements while still securing the profits that have previously been obtained.
Benefits of Doing Partial Close
Doing a partial close is indeed an effort to minimize risk. Not only for the risk of loss, but also for the risk of losing profit due to price reversal. Apart from that, there are also other benefits of partial close, including:
1. Minimizing the risk of loss
Partial close has been used since the beginning to minimize the risk of losses due to price movements that can suddenly reverse. Maybe the trader will still lose, but the amount of loss obtained can be reduced to as low as possible by using the partial close method.
2. Increase confidence in the analysis carried out
Partial close is also carried out if the price movement is expected to be farther from the level that is the target of the trader’s transaction. By doing a partial close, traders can receive profits but on the other hand can also follow price movements that have been predicted in advance through analysis.
3. Opportunity to generate greater profits but without risk
Partial Close is done by closing a portion of a transaction while it is in profit, so that some profits have been obtained safely and will not be reduced due to market fluctuations. Meanwhile, some positions that are still open can follow prices that are expected to move further so that traders have the opportunity to make bigger profits.
4. Reducing the psychological pressure when trying to hold a profitable position for a long time
By doing a partial close, trying to hold a position that is in profit longer becomes much easier. Because part of the position was previously closed, and part of the profit from the transaction already belongs to the trader. Therefore, even if the price does not go far, at least the trader has received some profit. And because the trader knows that he has nothing to lose, it becomes much easier for traders to hold onto profitable positions.
How to Do Partial Close
Not all trading platforms allow partial closes, so on trading platforms that do not allow partial closes this cannot be done. The way to overcome this limitation is to open several trading positions, so when you want to reduce the total transaction value a trader can close several “open transactions”. For example, in MT4, we cannot do partial closes.
On some trading platforms partial closes are allowed, so we can directly apply to closing part of our transaction value. Usually on the trading platform there is a partial close menu, both separate from the usual close menu, and as an advanced option from the existing close menu. An example of a trading platform that allows partial closes is MT5.
All stock trading platforms can do partial close, in contrast to forex trading, not all of which can do this. So in forex trading, if we want to include closing some of the transaction values in trading, we must pay attention to the trading platform that we use. Choose a trading platform that has facilities for closing some transactions.
Suitable Market Conditions
Closing a portion of the transaction value can be done in bullish market conditions or in a bearish market, as well as trading conditions, whether it is profit or loss, partial closes can be done, this depends on the transaction strategy, the trader’s view of the market, and the condition of the trader’s capital. . So there are no restrictions on doing this partial close, the only thing that limits it is the trading platform, or the trading terminal used by the trader.
