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Trade Management

  • #1
  • First Post: Feb 6, 2010 6:44am Feb 6, 2010 6:44am
Hi,

I have already spent a lot of time revising money management and trade entry. The challenge now is trade managamenet.

When determining when to enter, I have been looking at the trend, support and resistance. I have set my first stop loss slightly below the previous pivot or support line. This has worked well in capturing and entering trending positions.

When must I adjust my stop loss (if at all)?
And what rules apply?
How do you avoid being stopped out by pull back?

I have read some approaches where as soon as the trend resumes, the stop loss is moved to "break even point" or "new higher low".

What happens if the position beings to consolidate (go sideways)? Do you not move your initial stop loss?

Does money management come into any of these decsions? If I was willing to risk $500 per trade. Once the positions gains postive momentum do I now risk less $$ to lock in profits or reduce losses?

I am only looking at daily and weekly charts.
  • #2
  • Feb 6, 2010 11:22am Feb 6, 2010 11:22am
You can adjust the stop loss as soon as your trade is in some level of profit. For example if you are trading on daily charts, you can adjust syour SL to entry point as soon as you are in 70 pips profit and from tere on use trailing stop loss to keep securing your profits.


Quoting dmuk
Hi,

I have already spent a lot of time revising money management and trade entry. The challenge now is trade managamenet.

When determining when to enter, I have been looking at the trend, support and resistance. I have set my first stop loss slightly below the previous pivot or support line. This has worked well in capturing and entering trending positions.

When must I adjust my stop loss (if at all)?
And what rules apply?
How do you avoid being stopped out by pull back?

I have read some approaches where as soon as the trend resumes, the...
  • #3
  • Feb 7, 2010 2:01am Feb 7, 2010 2:01am
Quoting forexmarket
You can adjust the stop loss as soon as your trade is in some level of profit. For example if you are trading on daily charts, you can adjust syour SL to entry point as soon as you are in 70 pips profit and from tere on use trailing stop loss to keep securing your profits.
Thanks for the reply. I guess I am seraching for a scientific and discplined approach.

1. How much is "some level of profit"? Is this a calculation or simply a point on/above/below resistance?

2. How do you calculate where to place your trailing stop loss in terms of %?
  • #4
  • Feb 7, 2010 12:17pm Feb 7, 2010 12:17pm
Surely this point is going to be different for every trader. You should have tested your trading system and seen at what levels of profit that you may move you stoploss to break-even. This will depend on which instrument, timeframe, your risk profile amongst many things.

Another step is to reduce part of your risk once in some profit, by reducing your initial stoploss position to half, well before break-even, and when you attain break-even plus a few pips profit, then to take off half your position and then run the rest of your position with a trailing stoploss.

Formulate a plan, test, note result, modify, test etc. etc...
It never gets easier, you just get better
  • #5
  • Feb 8, 2010 12:03am Feb 8, 2010 12:03am
Quoting Shabs19
Surely this point is going to be different for every trader. You should have tested your trading system and seen at what levels of profit that you may move you stoploss to break-even. This will depend on which instrument, timeframe, your risk profile amongst many things.

Another step is to reduce part of your risk once in some profit, by reducing your initial stoploss position to half, well before break-even, and when you attain break-even plus a few pips profit, then to take off half your position and then run the rest of your position with a...

Ok... I ask in reference to trading the main five/six currency pairs on daily and weekly charts. I risk 1% of my account per trade.

Could you provide an example of how risk profile plays a part?

I am trying to formulate a "trade management" plan but remain confused on where and when to adjust my stop loss.

In the method you describe, you say "once in some profit". How do you calculate this? Is this simply price above entry?

Maybe some others can recommend a book, website or existing forum discussion that outlines this topic. I have searched but can't really find what I am looking for.

.
  • #6
  • Feb 8, 2010 6:02am Feb 8, 2010 6:02am
I don't trade daily or weekly timeframes, but here goes...
The rules are the same for any TF.

First you measure the stoploss distance to your entry and look at your possible targets, previous support, resistances etc.
Now if your account size and your risk profile (percent of your account you are risking on each trade), and your possible profit targets ( risk/reward ratio) is acceptable to your own trading style, you go ahead and take the trade. Remember capital preservation is what is most important. If it does not fit your risk profile, wait for the next trade to come along.
Your targets are going to be relatively larger than your risk, so that in the long run you can come into some profit

On the chart (Trade1), I have marked a possible place where you can reduce your exposure by lowering your stoploss, once you see that price has turned around & in your favour.

Another method is to use a limit sell entry as often at breakouts of trendlines you get pullbacks, I would place this at 50% level of the large bar before the breakout.

I have put on one chart the 2 methods, you only know which is right for you.
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It never gets easier, you just get better
  • #7
  • Feb 8, 2010 11:10am Feb 8, 2010 11:10am
Thanks for the additional response and chart.

I obviously need to do more further investigation to understand this area better.

Right now I feel I am rather randomly managing my trades based on price movement. I set my initial entry and stop loss based on technical, therefore I believe I should be managing the stop loss the same.

I can adjust my risk by either moving my stop loss or adjusting my number of lots or both?

To add to the complexity how must one handle adding to the position? If you raise your stop loss (eg to break even), are you okay to add to your position?

eek! Back to the books!
  • #8
  • Last Post: Feb 8, 2010 12:39pm Feb 8, 2010 12:39pm
Personally I would not add to my position once in the trade, I would rather be taking profit off in stages. What if in Trade 1, the price rebounded back upwards ?

You don't know if the second profit target will be met. At least the first portion was in profit and the second part breakeven, if it goes against you.

You could divide your profit targets into 3 or 4 parts, if that is what the chart tells you must do.

Start off with the right lot size to your capital (recommend 1-2% max exposure) and build your capital up, overtime you should be able to increase your lot sizes and compound profits. Stay in the Game, Don't blow it Up.
It never gets easier, you just get better
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