Time stops are stops you set based on a predetermined time in a trade. It could be a set time (open limit time of hours, days, weeks, etc.), only trade during specific trading sessions, the market’s open or active hours, etc.
For instance, let’s say you are an intraday trader and you’ve just put on a long trade on EUR/CHF and it hasn’t gone anywhere. We’re talking real snoozeville here!
Why keep your money locked up in this trade when you can use it to take advantage of this one…
More movement, more pips! Yeah baby!
Because of your predetermined rules and the fact you do not like to hold trades overnight you have decided to close the position at 4:00 pm, when you’re usually done for the day and go off to your bi-weekly StarCraft 2 tournament.
Or maybe you are a swing trader and you decided to close your positions on Friday to avoid gaps and weekend event risk.
Also, having some margin tied up in a dead trade could be costing you an opportunity in another great trade setup somewhere else.
Set a time limit and cut off that dead weight so that money can do what it is meant to do… Make more money!