1/15/2020 USDNOK ( management of the trade ) Another Forex Trading Snack.
From my original posting of the short opportunity that I saw in USDNOK, my tactics have always been in building a position up to take advantage of my longer term bias for the pair. The market will do what’s its going to do and all we can do is catch a ride if we can.
Newer traders might just catch a great entry point but only get taken out for a few pips at best. Usually new traders get all excited to see a trade move into a profit zone, but this caused beginners paralyses in taking good trading practices action far to slowly. However when price bounces back up towards entry price or worse, at this point of the new traders cycle of trading, the new trader tends to take action far to fast in the hopes to avoid trading pain, losses, or an attempt to greatly limit losses. Instead lack of action or trade planing have limited their overall success.
Take this chart view for instants. It shows 3 trades I set up, 2 that were filled and the last one just setup and stands still open at the time of this posting. Each trade was taken with multiple lots per order. In this way a trader can take one lot off to take partial profits while allowing the other to run.
If you only place one lot orders— you are at the mercy of the markets to either give you a profit or a loss. Once you decide to take profits you’re out of the trade. Sure the market could bounce back in your favor to re enter, but just as easy it could keep going. On the flip side a new traders mindset could say if I trade 2 lots I’m taking more of a risk to my trading account. This is also true! However if you place your trades close to confluences, indicators and support / resistance levels / trend lines.... what ever your edge is, you have well defined entry points with limited risk points.
Take this trade setup. My original entry had 100 pips of risk. The first entry moved in my favor and I had a hard take partial profits at 100 pips. So without moving stops on the remaining lot it turned out taking a partial profit eliminating all risk on the remainder of the trade balance.
My bias didn’t change so finding the next attempt at a new entry was easy. Next lower red box, is my take the trade zone as well as where the extreme stop would be. When setting up the second entry and stop I also moved the first balance trade stop as well to the same place. The second entry had 130 pip stop. Because of stop placements and the first trades partial profits taken, the over all total risk take was only 130 pips even though, if the second trade was filled the total lots on this trade would be 3 lots.
1 original lot profit taken +100 pips
1 lot from original entry with a +30 stop
2 lots second entry with 130 pip each or 260 total stop
Over all total risk / profit once second order was filled 130 total pips with 3 total lots.
Again the markets moved in my favor. I took again partial profits of 300 pips this time, leaving 2 remaining lots on my trade idea. Now moving my stops down to the second over all high price on the remaining lots, I’ve eliminated all risk on the remaining 2 lots as well have locked in a 400 pips of profits. Well at the time of the post my 3rd entry has not yet been filled. This 3rd entry will be 3 lots with a 125 pip stop per lot or a total of 375 pips for my total risk. If stops get triggered I still take home 25 pips total profits. Previously locked in 400 - 375 on 3rd entry if stopped out = + 25 pips.
If and when the 3rd orders get filled I plan to allow this trade idea to ride out to my longer term profit zone. The only management of this trade will be moving the over all stop of this trade for all lots. This will by moving stops to lock in profits on all lots of the trade. If the 3rd part isn’t filled the trade management is still the same on the 2 lots still running.
Each currency pair has it own need for different stop sizes according to its own daily average moving range.
As traders we must except that the only part of trading that we can control is our own level of risk taken. With this example I think I’ve shown how to trade a longer term idea while reducing risk without taking yourself totally out of the position until the market takes you out. We should alway be looking to allow your winners to run. Manage your trade ideas to eliminate taking a large loss and your trade plan should include allowing the trade idea to run as far as the market will allow it to run while reducing the overall need to personally manage the trade position. Once a trade gets to a risk free trade with all risk of loss to my trading account eliminating, I just wait fir the market to get to my profit targets or my managed stop levels. Just let the market take you out one way or the other.
As always this is only for educational purposes only.
All the best in your trading.
Trading currencies is the hardest easy money you’ll ever try to make. Plan your trades and trade your plans.
