To be consistent, you’ll need to be able to adjust to market changes after you’ve gotten in and to manage your trades properly. Hanging on and hoping that you’ll reach your goal is a poor approach.
Having a low-risk/high-reward entry is excellent, but unless you prepare for various circumstances, your outcomes will never match the potential you know they have.
We use some trade management methods in our signal program to ensure consistency. As the statistics reflect, these trade management techniques are very efficient.
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The way you manage your trade and how you execute it are connected.
For example, you may enter 50% at the market with a wide stop and the rest on a limit. When you reach the limit, you may either accept or cancel it. You can also take part or withdraw all of your remaining amounts when it gets close to the point where you originally placed your stop-loss order.
On the other hand, you might opt to go all-in at the market with a tight stop. It affects how you manage the position.
Consider the following things when you put your trade into action.
- 50% at the market and 50% on a limit
- Tight or wide stop-loss placement
- Single or multiple targets
- Position size
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Breaking your position into parts
Breaking down your trade into several pieces might be necessary when executing successful trade management. For instance, you scale out of your position and perhaps even re-enter sections you have previously exited.
Break things down into three parts to make them easier. Each of these components has its own goals.
Targets to improve consistency
I recommend that you establish three objectives for your trade. You have more opportunities to make money by having multiple exit orders in the market. It is simple yet successful.
- Close to your entry price should be one target.
- The second objective should be 2-3R away from your “real goal” (3 times the risk), and you should set on a key level where the price is most likely to reverse.
- Finally, strive for huge gains through a faraway objective. It might be a critical level at least 10% away from the current price for longer-term trading, or for short-term trading, it might be a multiday shift.
If there are no prominent areas to put targets, you may instead decide to let your profits run based on the trade management rules below or a combination of both.
Other than that, it is dependent on your setup. I’ll only let breakouts with low volatility run for the last target. For different configurations, targets are pretty crucial.
Consider the market with an open mind while making rational choices when establishing each trade, and stick to it.
Optimizing scale-in entries
On a small scale, it may make sense to utilize OCO (one-cancels-other) orders to obtain a lower price for your scale-in.
Consider what the best approach to use this scale-in opportunity is.
Using this subtle approach, I occasionally get a better entry while still avoiding missing out on a powerful trend—it’s worth noting that movements don’t happen in neat lines!
Three tips for successful trade management to manage your trades
The first step in managing the trade is to have evident standards. If you have uncertainty, you will make inconsistent judgments, which will result in various outcomes. Be precise about the meaning of each component of your strategy.
The second method is to keep things simple. As previously said, not all trade management approaches will be suitable for your technique. If a rule adds complexity without improving performance, shelve it. Pick and choose the ones that will produce the most fruit, and if regulation is adding complexity but not delivering better results, toss it.
Finally, remember the crucial principles of trade management. The goal is to assist you in finding the correct balance between cutting your losses short, allowing your profits to run, and taking profit when the market provides some.
If you apply these three-pointers to manage your trades, trade administration will most likely become the focus of your trading.