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The Power Of Trade Management

How you manage your trades and having a trade management style that fits you will have a great impact on your results.

This is often a question I get asked ''What's the best trade management technique?''

And my answer is always the one that fits YOU.

You see how you manage your trades is a very personal thing it has to be something that is compatible with your personality and risk type.

Are you a more conservative type of person who wants smaller drawdowns, and higher win rates because you know you will be more confident and less prone to emotional tilt or are you more the aggressive type who wants to gain as much meat of the move as possible because you know it would drive you crazy taking a small win and then see the market take off to the moon.

Knowing how you will react and understanding your own psychology will have a huge impact on what trade management you should choose.

This is where some deep introspection and reflection is needed.

It's very important you understand yourself before you decide on a management technique.

But obviously, if you're just starting out then you will not have much knowledge of the different types of management.

So today I will break down a few that you can begin testing yourself.

4 Main Trade Management Techniques

1. Set Forget

2. Trailing

3. Partials + Trailing

4. Time stops

Set and Forget

This is a very simple technique you simply have a fixed Target let's say 1R (Risk 1 to make 1) and once you enter you set your targets and walk away and let the trade either hit the target or your protective stops.

This is a good technique for beginning traders to start off with as it allows you to not get caught up in worrying about managing trades and remove yourself from the environment and can help avoid sabotaging your trades.

Trailing Stop loss

This method involves you trailing your stop loss as the market moves in your favour. You protect your downside and truly maximise your upside potential.

Some common ways of trailing are either using

Previous Structure Points

e.g Higher highs and higher lows in an uptrend.

Lower Highs and Lower Lows in a downtrend

EMA Break

Trailing with the ema is a great objective and mechanical way of trailing.

For example, trailing with the 20 ema you would only exit when the price closes past the 20 ema

ATR Stop (Chandelier Stop)

This method trails your stop loss via the Average Volatility of the market.

Let's say you use 3 ATR stop loss as the market moves in your favour. If the average move on that timeframe is 20 pips then you would move your stop loss every 60 pips.

Partials and Trailing

So this is simply a mixture of the previous 2 methods.

What this method allows you to do is bag some profits early on and trail the rest.

What is good about this hybrid approach is it avoids you from going away with nothing because when you just purely trail your stops a lot of the time price can come back after being in profit but then reverse leaving you with nothing.

When having a mixture of both trailing and partial profits allows you to keep the drawdowns low and keep yourself emotionally balanced from not seeing any return when price was in the positive.

An example of how you could trail is to take 1/2 off at 1R maybe and then move your stops to breakeven and trail the rest with the 20 ema and exit when the price closes below/above the ema.

Time Stops

This is one of my personal favourites. What this entails is you simply have a fixed amount of time before you exit.

With this method, it gets you out of a lot of bad trades due to either bad timing or just being plain wrong about the trade.

You see if you are trading a breakout or a reversal for example if you were right about the trade it should work pretty much straight away if doesn't and it just begins to drift sideways for example then there is usually something wrong about the trade and the best thing is just to exit.

With a time stop you create an objective and mechanical exit technique that removes discretion.

An example of this is if the price has not moved into profit after 4 candles then I will exit the trade.

So if you were trading the daily timeframe and it has not moved into profit after 4 days then you would exit. Simple as that!

Final Thoughts

So there you go I hope you understand how important finding the right trade management for you is crucial and maybe one of the methods above may be the one for you.

If you did comment below and let me know!

Have an incredible day my friend!



Need more help?

Build a winning mindset 'The Blueprint To Trading Psychology.' here

Track and Journal 'Emotional Trade Tracker.'' here

Learn my Rule-Based and Mechanical trading methods here


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