So, today I made the mistake of shorting when I expected a retracement on the EUR/USD. I wasn't being terribly formal about it, so I had no stop loss set, and naturally it never retraced and that position is -3844792 bajillion pips or something along those lines.
This is a demo account (hence the lack of formality), so I started considering how to handle it. Obviously option A is to close the trade immediately and eat the dramatic loss. The original basis for the trade was wrong, so this seems to make sense.
But that bothers me. Its highly unlikely that the price won't go back to that point some time in the future, or at least much closer than it currently is. So whats the downside to keeping the position open until then? As far as I can tell, its just decreased margin, until I close it (or am forced to close it via margin call, a perfectly realistic scenario in this case). I can't claim certainty about how margin/leverage/etc and such work, but I think I understand the basic idea.
So I tried opening a long position with the same lot size and no SL/TP, to test if the profit from that position was counted towards my available margin. It looks like it is, since with the long position open, my free margin value isn't changing no matter where the price moves. Which, if I'm not mistaken, means I can "freeze" that position at its current loss by opening an opposing one, and exit out of those positions whenever I find a good way?
That seems too good to be true, so I'm sure it isn't. What am I missing? My best guess is profits from open positions wouldn't be counted towards free margin on a live account. Or that I'm misunderstanding something about how margin works completely, I've been putting off fully grasping that until I'm almost ready for live.
This is a demo account (hence the lack of formality), so I started considering how to handle it. Obviously option A is to close the trade immediately and eat the dramatic loss. The original basis for the trade was wrong, so this seems to make sense.
But that bothers me. Its highly unlikely that the price won't go back to that point some time in the future, or at least much closer than it currently is. So whats the downside to keeping the position open until then? As far as I can tell, its just decreased margin, until I close it (or am forced to close it via margin call, a perfectly realistic scenario in this case). I can't claim certainty about how margin/leverage/etc and such work, but I think I understand the basic idea.
So I tried opening a long position with the same lot size and no SL/TP, to test if the profit from that position was counted towards my available margin. It looks like it is, since with the long position open, my free margin value isn't changing no matter where the price moves. Which, if I'm not mistaken, means I can "freeze" that position at its current loss by opening an opposing one, and exit out of those positions whenever I find a good way?
That seems too good to be true, so I'm sure it isn't. What am I missing? My best guess is profits from open positions wouldn't be counted towards free margin on a live account. Or that I'm misunderstanding something about how margin works completely, I've been putting off fully grasping that until I'm almost ready for live.