Do you have a proper trade management? Your answer might be YES! Because you know whenever you place a trade, you are sure to place a stop loss and profit target.
In fact, that’s how I and every trader do. It’s more like a set-and forget system and it’s a good way to prevent our emotion from changing our trades.
But, there are times that we might want to do something to our open trade. And this can be part of trade management. So if we can manage our open positions effectively, we can bring in bigger profits, lower risk – and a more positive attitude to trading.
So how do we manage it?
Mark Rose has this 7 rules of trade management that we can follow.
Rule 1 – The set-and-forget stops and target
This is known to us and that is what we are doing for every open trade.
Rule 2 – The unexpected news story
As we know, this can be sudden and unexpected. I have a few occasions like these. Before I can re-evaluate my position, the open trade has been closed. But, if you have the chance to re-evaluate, change your exit strategy as Mark Rose suggested, “either close it or move your stop and target.”
Because of this, the above stop loss and profit target setup comes into play. So, you either closed with a profit in the right direction or closed with a protected loss when it goes in the wrong direction.
Rule 3 – The expected announcements
These are regular economic announcements that we can monitor and make our decision whether to avoid trading, close our trade early, or adjust our trade depending on whether it is positive or negative announcement. You can look at the example that Mark Rose has illustrated.
For me, I always keep track of these announcements and look at the consensus data versus the previous data to decide what to do if I have an open position. Sometimes, I manage to make a profitable trade out of it.
Rule 4 – Trailing stops
There are 2 types of trailing stops – the automated one and the manual one. From what Mark Rose has explained, automated one is not a good option and the better way is to manage it by ourselves. So, if you not familiar with trailing stop, I suggest to keep away from it. For me, I don’t use trailing stop for now.
Rule 5 – Scaling out
I find that this technique can be explored. It helps to minimize my losses in a way if the trade is against me and be in small profit if I am not sure of the market direction. I would recommend applying this scaling out technique as it can help us to reduce our risk exposure on our profit in the market. By taking partial profits means that you can bank in that money and put it to work in other trades.
Rule 6 – Risk management
Good to watch out and not to increase our risk levels. As what Mark Rose said, “If you have to open two orders in order to exit them at two different price levels, make sure that you’re using half stakes and not doubling your risk.”
Rule 7 – Planning
By making a proper trade management as part of your trading plan, I believe that you can deal with open positions in a more active and profitable way.
Do you have a successful trade management to share? Leave your comment below.