Knowing how a long trade may last has multiple benefits. Before taking a trade, write down or be aware of how long similar trades have typically taken before reaching a profitable exit, such as a profit target or trailing stop loss. Do this by looking at prior similar trade setups, or how much the price typically moves.

Here are some of the benefits of knowing how long a trade will last. It is not hard to do, so have an idea of how long a trade will last before taking it.

• Doing this makes sure you have considered the trade setup and know how the price has moved after prior similar trade setups, or how much the price is moving recently and overall. If you don’t have evidence the trade setup works, don’t trade.
  
  
• Knowing how long a trade lasts helps you stick to your trading plan. If recent swing trades in a stock typically took two weeks (give or take a few days) to reach the profit target, you don’t need to fret over the daily movements. It will take about two weeks for the trade to play out.
  
  
  • When comparing trades, profit targets should be similar.
    Otherwise, adjust accordingly, or look at how long it has typically taken the price to move the distance of your current target.
    
• While you are looking at how long a trade typically takes to play out, also note how the price typically moves on the path to the target. This can also help ease the mind. Note what you can expect during the trade. Pullbacks and fake-out moves may be common. Note that they happened, but that more often than not the trade setup still produced a profit over many trades (if it didn’t, why are you trading it?). The more prepared you are for what to expect during a trade the better. 
  
  
• While most of us know the price won’t instantly move to our target (or into a huge profit), the second after we enter a trade, most of us are hoping it will. By being aware of how long a trade may take, it eases the pressure and anxiety. If we know a day trade typically takes 5 minutes to reach our target it isn’t a problem if the trade gets off to a slow start and isn’t moving much. We know it will probably take 5 minutes. The person who doesn’t know how long their trades will take has to sweat out every trade, likely thinking something is wrong every second that they are in the trade…even if it’s only been five minutes (or possibly weeks in the case of a swing trader). Self-inflicted torture!
  
  
  • Day trading can be hectic, especially on a busy day. Don’t fret over knowing exactly how long trades last. A general idea is fine. As a trade sets up we typically have a few minutes where we start to consider a possible entry and where we will place our stop loss and profit target. During those few minutes, we can look at prior price waves, briefly, and determine how far and fast they are running (are the waves getting bigger or smaller?). This may also help with determining if it is a worthwhile trade, and what type of reward:risk we should be considering.
    
    
• Part of the allure of trading is that it doesn’t need to take up our entire day. Most traders forget this and obsess over their charts constantly. You don’t have to. If you know a trade is going to take a month, you don’t need to check on that trade hourly or daily. Check it once a week. If you have a stop loss and profit target placed, there is nothing to do anyway. Let it play out.

How long the trade may last doesn’t need to be an exact number, just a general idea. We can’t know for sure how long a trade will take, unless the trade has a timed exit**. But a general idea, or a range of values, is all we need.

**Timed exits mean you exit at a certain time. Day traders may have a timed exit in that if they exit trades at the end of the trading session or before a major news event (or some other relevant time to them). Some traders may wish to exit before the weekend, which is also a timed exit. A strategy may also have a timed exit. For example, a trader may have found that the price tends to run for three hours (or three minutes, or three weeks) after their entry, but then tends to reverse direction. They exit after being in the trade for three mins/hours/weeks.

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How to Determine How Long a Trade Will Last

If you are trading a setup that hasn’t occurred on the chart in while, look at how the price is recently moving. Look at how long it typically takes the price to move the distance from your entry to your profit target. 

If you are striving to make 300 pips on a forex trade, how long does it typically take the price to move 300 pips? Look for multiple examples to give yourself a range of values. Maybe one time it took a week, another time it took three days, and another time it took two weeks. More than likely that trade is going ot take a week or two. But maybe, if there is a sharp move, it will be quicker.

Here is a day trading example using the technical turnaround strategy and the failed technical turnaround. The first two trades have similar targets (about 5 pips) and last about 5 minutes. The second two trades have slightly larger targets, about 6.5 pips, and take about 9 minutes.

When we get into a trade it is helpful to know that. If you think your trade is going to explode to your target as soon as you get in, 9 minutes is a long time to sweat it out and potentially make a mistake or deviate from the original trade plan.

Charts from TradingView.

The same concept would apply whether swing trading forex, swing trading, or day trading stocks.

Here’s a swing trading example. After establishing a profit target of about 16%, we can look back in time and see how long it typically takes the price to move 16% out of similar setups. Prior moves took 8-11 price bars. This provides a rough estimate, letting us know we will probably be in this trade for at least a week or two. The trade played out and hit the target in 10 trading days. It isn’t always so accurate, but can still be helpful.

The more you know about the trade you are undertaking, including how long it may take and the whacky price moves that may occur between your entry and exit (based on prior setups), the better off you will be. If you are prepared, you are less likely to start doubting yourself. You are more likely to follow your plan and maintain your discipline. Your patience will appear to improve because you already know how long it will likely take to get your reward.

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By Cory Mitchell, CMT

Disclaimer: Nothing in this article is personal investment advice, or advice to buy or sell anything. Trading is risky and can result in substantial losses, even more than deposited if using leverage.