Sophia Todorova has a background in teaching and psychology, and as such relishes the idea of assisting new traders on their journey to Forex trading success. Technical Analysis is her passion. The charts speak, and she listens.
Trade management is a weak area for many traders, and can mean the difference between winning and losing in spite of how good a trading strategy is. Although not widely used, trading with multiple positions offers a flexibility in trade management which would be difficult to attain otherwise. In doing this however, it is important that the trader is with a broker which allows you to trade in small enough increments so as not to over-leverage your account. A powerful method of trade management is to scale out of losing positions gradually. For instance, if three positions were initially entered on a trade, you have the option of scaling out one or two of those positions while keeping yourself in the game. If the trade does turn around you can scale back into it. If the worse happens, then you minimize loss by not having taken the full hit on your stop loss.
If, on the other hand, your trade works out from the start with nice momentum, you can take partial profits on one position at a pre-determined target level. You can also scale that position back in on a retracement, and even add more positions to the trade after having moved your stop to break-even, and are, in effect running a free trade. I like to run my winning trades until I get some definite signs of reversal. Additionally, you can strengthen your edge even more by only taking trade setups that offer good risk/reward ratios.
This is the method that I have been using and I find that I can sustain a string of losses where I lose more trades than I win, but still be able to make a profit.
Thanks for reading, and please do share your own tips for trade management. Safe trading, and a great weekend to you!
Winner’s Edge Trading, as seen on: