Jan 6, 2010

Forex: Trade Management

Hey All,

One of the best part about forex trading is that the vast market liquidity allows for very accurate trade management strategies to be employed.

Forex traders would have probably heard of the saying "Keep your losers small and let you winners run". Here are some examples of what it means.

Example 1:

You entered a trade at 1 standard lot ($10 per pip) with a stop loss (I'm a firm believer that you should ALWAYS employ stop losses) of 100 pips (equivalent to $1,000). The trade moves in your favor 50 pips and now you have options to either:

1. Move your stop loss to breakeven, which means that you are totally risk free for this trade. At worst, if price reverses to your entry price, you would have made no profits and no losses.

2. Take partial profits i.e. Close out half (or any amount) of the position at 50 pips profit and let the others run.

The above are only two examples of how you can manage an active trade, there are probably as many variations out there as you can think of.

Example 2:


Here's how one of my trade buddies, @piptee does his trade management which he calls the "I Don't Care Entry". Click HERE for the article.

Mastering the art of trade management will greatly improve your trading. As Alan Farley puts it, "Experienced traders control risk, inexperienced traders chase gains".

I hope this will help you come out with some ideas of your own. And when you do, why not share them here as well?

Happy Trading,
Leo

35 comments:

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jatt said...

It is not easy to manage our trade.Sometimes we need an extra cautious..but sometimes, greedy is good..

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