Trade Management

[lindsayf]

Gday all
I'm not really a beginner because I began over 2 years and probably 3000 screen hours ago. During that time Ive looked at a lot of methods, instruments and timeframes. In the last 6 months I have managed to achieve significant profitability on Forex (1 hour timeframe) and I continue to research and sim trade futures index methods on lower timeframes. Bit by bit I believe the important messages are getting to the right part of my brain.

I am interested in peoples approach to managing a trade once you are in the market - I don't care if you are a fundamentals phd, a TA master, an astrologer, a fish slapper or a coin tosser but how do you manage your trades once you are in? I think at the end of the day trade management and understanding probabilties will make you or break you.

I have tried 'all in then scale out' for a while and found it didnt work well for me over a series of trades. I have therefore moved to all in, all out and this is suiting me a lot better. With my single validated and proven method ( I know, it is perhaps not a lot to show for all my work) I have a roughly 50% win rate with my average win nearly twice my average loss over a set of 100 trades by my rules. This has me feeling good about my approach. But - what do others do, why do you do it and how long has it taken you to get to what you are using now??

thanks

 

[Lone Wolf]

G'day,

Your description of yourself in the first paragraph sounds a lot like me... minus the part about achieving significant profitability. I've spent too much time looking at charts and not enough time trading them. So I really have no place commenting. But I thought I'd bump the thread for you in hopes some experienced trader pays more attention to it. Everyone wants to know how to get better entries, but finding the best exit can be the hardest part.

Many people talk about moving stops to break even ASAP. But this can be bad, as your stop was originally set at the most logical place for a stop. By moving the stop to break even you have now moved the stop to a position which may have a higher probability of being hit. Another way of moving to break even would be to close half the position when in enough profit to cover the remaining half should it be stopped out. The drawback here is that you risk the full amount at the start of every trade but only half your position ever reaches your profit target.

It also depends on how you currently decide to close a trade. If you have a set take profit area, you might benefit from leaving something on the table to catch those occasional unexpected runners. In my case I have the opposite problem of leaving too much out there, hoping to catch a run, just to find it comes all the way back to stop me out. In that case you may find you do better simply by setting a fixed take profit, then go all in, all out. So long as your wins are larger than your losses you can afford a win rate of 50% or even less.

At the end of the day you should use what works best with your proven method. It sounds like you have a successful system and just want to find out how to get the most out of your winning trades. Perhaps you could open a demo account with another broker and take the same trades there but with a different trade management system and compare the results? Managing two trades at a time might be a pain but it could be possible on a higher timeframe system. Either that or use a sim to replay the same trade using different management rules.

Anyway, just some food for thought while you wait for a more experienced response. Oh, and congrats on finding a method that works for you.