Cover On Approach

AAA

DEFINITION of 'Cover On Approach'

The closing out of a profitable short position as the security moves toward a key level of support. As a security moves closer to a level of support the chances of it falling any further weaken because buying has come into the security at the support level, which keeps the price from a continued downward move and limits the continued success of the short trade.

BREAKING DOWN 'Cover On Approach'

Critical support levels often provide limits for how far a security can fall. By covering before the security gets to the support level, they are being conservative with their gains as support levels limit further moves downward and can often see large moves back up as the security bounces.

RELATED TERMS
  1. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  2. Pip

    The smallest price change that a given exchange rate can make. ...
  3. Support (Support Level)

    The price level which, historically, a stock has had difficulty ...
  4. Cover On A Bounce

    The covering of a short position after it has reached and bounced ...
  5. Currency Pair

    The quotation and pricing structure of the currencies traded ...
  6. Forex - FX

    The market in which currencies are traded. The forex market is ...
Related Articles
  1. Forex Education

    Top 7 Questions About Currency Trading Answered

    Whether you're puzzled by pips or curious about carry trades, your queries are answered here.
  2. Forex Education

    Make The Currency Cross Your Boss

    Tap into a world of possibilities by going beyond the simple pro- or anti-dollar trade.
  3. Forex Education

    Forex Tutorial: The Forex Market

    In this online tutorial, beginners and experts alike can learn the ins and outs of the retail forex market.
  4. Chart Advisor

    Stocks to Short...When the Dust Settles

    Four short trades to consider, but not quite yet. Let the dust settle and wait for a pullback to resistance for a higher probability trade.
  5. Investing

    Using Fibonacci to Analyze Gold

    Use Fibonacci studies to analyze gold by picking out hidden harmonic levels that can provide major support or resistance.
  6. Chart Advisor

    Strong Stocks with More Bullish Potential

    These stock are trending, and setting up to go even higher. Here's how to trade them.
  7. Mutual Funds & ETFs

    Using Moving Averages to Buy ETFs

    Learn how to use moving averages to enter and exit trades in ETFs, and understand some popular technical setups using moving averages.
  8. Charts & Patterns

    Avoid The Perfection Trap In Trading

    Avoid the perfection trap and make peace with the market’s high levels of systematic noise.
  9. Chart Advisor

    3 Stocks Channeling Higher and In the Buy Zone

    Trending higher overall, and trading near support following a pullback, these stocks are in the buy zone.
  10. Chart Advisor

    Stock Chart Patterns to Keep an Eye On

    Some of these stocks are exhibiting big chart patterns, so a breakout is likely to be significant.
RELATED FAQS
  1. What is a pip and what does it represent?

    A pip is a very small measure of change in a currency pair in the forex market. It can be measured in terms of the quote ... Read Full Answer >>
  2. How can a swing trader use a Fibonacci retracement?

    Swing traders can use the Fibonacci retracement to determine levels of support and resistance for a price on a chart, as ... Read Full Answer >>
  3. How can I apply sensitivity analysis to my investment decisions?

    When a stock doesn't reach a lower swing, create a trading strategy by using the previous swing low as a pivot point. If ... Read Full Answer >>
  4. How can I use simple moving averages to swing trade?

    Use simple moving averages (SMAs) as technical indicators to signal buy and sell entries when swing trading. SMAs provide ... Read Full Answer >>
  5. Are simple moving averages backward or forward looking?

    Simple moving averages (SMAs) are technical analysis tools traders and investors use to smooth out a security's past price ... Read Full Answer >>
  6. How is a simple moving average calculated?

    The simple moving average (SMA) is a widely used technical used by traders and investors. It can be calculated for different ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  2. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  3. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  4. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  5. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  6. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!