Trade Management

Once we know where we want price action trades to form and which price action setups to look for, we need to consider our trade management of trades. Trade management is to be honest where all the fun and games really begins, the reason being with so many different options available and the added pressure to try to take every last pip off the table, traders can get lost and unsure what the best and most profitable route to take is. In my opinion the best solution is to let the previous price action guide us on how we manage our trades.

By determining what type of trade we are taking, whether it be a trend, counter trend or range trade and using the previous price action printed on the charts we can set realistic and considered targets for each trade we take. For example, if we were taking a trend trade I would be setting much more optimistic take profit targets compared to a counter trend trade.

Trade management requires a consistent approach and once you find your confidence you will be happy with taking profits at certain points rather than kicking yourself for missing a few extra pips. No trader will ever have a trade management style which will gain 100% of the profits available from each trade, the key is to learn to accept this fact and be happy with taking profits from the markets when they are presented to us.

So what factors do we need to consider before entering a trade:

  • Entry point
  • Stop loss
  • Take profits
  • % risked on the trade

All of the above factors make up our trade plan.

So what is a trade plan?

A trade plan sets out how we will manage the trade from beginning to end. It should always be produced prior to entering any trade or putting any money on the line.

We basically must decide every little detail of how we will manage a trade and write it down, so we can follow it to the letter. Following trade plans helps to prevent us from changing things half way through a trade and messing the whole trade up.

Making trade decisions once in a trade is very dangerous and is not something we should do because our judgement is clouded by money, fear, etc….

So what should we consider when writing a trade plan:

  • Entry point, we must decide where we want to enter the trade
  • Stop loss, we must choose where to place our stop loss and how to manage the stop loss as the trade progresses.
  • Take profits, we must select where we will take profits from, maybe partial profits at one point and the remaining profits further on.
  • The amount we risk on the trade, we use the difference in pips between the entry point and the stop loss point to calculate our risk per pip. Making sure we risk the correct amount on each trade is very important.

If we have all of these decisions made prior to entering a trade, we will have a far better chance of allowing the market to do its own thing and rely on our initial trade analysis to play out. Trying to second guess the markets once in a trade will just give you a big headache and just increase your stress levels.

Check out this article: Why is a Forex plan so important?

The advanced course goes into a lot more detail into how to manage trades but the main advice I can give you here, is to start producing trade plans and stick to them.

Module 1: The Basics

Module 2: Market Analysis

Module 3: Price Action Setups

Module 4: Chart Setup

Module 5: Trade Management

Module 6:  Trade Psychology

Module 7: Continue your learning