TRADE MANAGEMENT APPROACHES
Opening account with a broker and funding, you are set to start making money in forex ? you just entered a position and successfully executing your position, it is now time for trade management. This refers to all the activities and actions a trader takes to ensure he minimizes risks and maximize potential profits. Trade management is an important undertaking for every forex trader. It will determine the performance of the trade and how profits are gained. Just like managing your time, managing your money, or even managing your family, trade also needs to be organized in such a way that it will yield profits. Effective trade management will ensure a good flow of orders, fewer risks, and sustainable capital growth.
There are functional techniques and methods that are useful to manage trades and are helpful to every forex trader. You should carefully and diligently manage your trades without any emotion involved. What many traders like to do is that they tend to sell a position that brings quick and huge gains without considering the dangers involved. The best course of action to take in this scenario is to sell the loser positions quickly and maintain the winner positions for as long as they keep winning. This is considered a prudent management of a position.
BEHAVIORS TO AVOID IN MANAGING TRADES
More often, trade management is a long process that has a variety of steps and stages. During these stages, we engage in behaviors like emotional and psychological behaviors that may hinder our management prowess. Among the harmful behaviors we must desist from include:
– Overusing the concept of margin.
– Concentrating in some positions and leaving the others unattended. This is where traders concentrate on positions that sell faster and leave the slow sellers.
– Falling in love with A currency pair or stock to the extent that a trader may not sell the stock even if the highest price is experienced at that moment.
– Averaging down to the losing positions.
– Concentrating in a particular sector or part of a trade.
For any trader who wants to safeguard his/her trade, these behaviors must be avoided at all cost for effective trade management. In this article, we will outline two major positions of trade management that are vital in safeguarding your portfolio. This includes managing the buy position and the sell position. Let’s now look at each and see how it helps in trade management:
MANAGING BUY POSITION
If you have entered your position and you are now in the buy position, it will be advisable for you to shift your stop loss such that it is at the higher side of every newly formed impulse. To effectively shift your stop loss you have to ensure that the impulse is higher than your present stop loss. If this is not the case then you should pay no attention to new impulse. To enhance your trade management and avoid running into losses, never shift down your stop loss when you are in the category of buy position. It is important to understand the fact that for every impulse to be valid, two candles need to close. Hence, you must not shift your stop loss except after the impulse has been established to be a valid one.
MANAGING SELL POSITION
Once you are in the sell position you will be required to shift your stop loss downwards until it is at the tip of every newly formed impulse. You should know that stop loss is shifted to the peak of the impulse. For you to effectively shift the stop loss, the impulse should be lower than the present stop loss. If this is not the case you should, therefore, pay no attention to the new impulse. For instance, you are not allowed to shift your stop loss upwards when you are still in the sell position. After achieving your profit target in the stop loss chart, then it means your trade is concluded and it will now close automatically.
Your account will show any potential loss or profit. This is now where you will ascertain if your trades are making profits or going into losses. Therefore, you will know which course of action to take after coming up with the figures. For example, you can decide to close the position if a loss is projected, or you can add your positions if profits are projected. For a prudent trade management, traders should know that forex market closes on the weekend and you should, therefore, close your trade on Friday at 18:00 GMT.