How to Manage a Trade?

Filed under: Learn Forex Trading |

A few issues arose today regarding managing our live trades, so today, I would like to talk you through some of the different ways in which you can manage a trade once it is up and running.

 

The simplest thing to do when a trade is a made, is something called a ‘set and forget’ trading style. This is, as you can guess, a methodology where once a trade is on, you simply forget about it and let it run to a logical conclusion – this being either your stop loss or your target. This stops you getting emotionally involved in your trades, and keeps things as simple as possible.

 

A second way you can manage your trades, is to move your stop to breakeven once it has got into some decent profits. This is the old adage, ‘you should never let a winner turn into a loser’. However, there is a problem with this. You need to give the market some space to ‘breathe’, as the markets almost never move up or down in a straight line, but rather, then step up or down. Therefore, if you use this method, you will find that a lot of your trades end up at breakeven (although many people find breakeven to be a good result as their bank is protected for another trade).

 

One final option, which is something of a middle ground, is to take partial profits once they are there. For example, if you have a trade on with a risk-reward ratio of 1:2 (risking $100 for a profit of $200), and you are in profits equal to your risk, then you could take $70 profit (by closing 70% of whatever lots you have taken), and let the other $30 run, leaving your original stop loss in tact. If your stop loss is hit, you will still make a profit of $40. And if your target is met, you will make a profit of $130. Not as good as your original $200 target, but not bad as it does put you in a win-win situation.

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