Managing Trades (Trade Example)

Filed under: Learn Forex Trading |

Last week, I discussed a trade setup on the USD/CHF forex currency pair (the pair for the US dollar and the Swiss franc), and today, I would like to discuss the result of this order, and how you could have managed the trade better than I did.

 

Figure 1.

Figure 1.

To begin with, just for a little reminder of the setup, take a look at Figure 1. We put an order in at a 50% retracement of the highlighted bearish pin bar; with an initial stop loss placed just a few pips above the high of the pin bar, and a target set of four times the risk. This order was filled on the first day.

 

Unfortunately, personally, I made a bit of a mess of this one. After the first day, a small bullish engulfing pattern formed, and I decided that I would be happy to get out at breakeven at that point, and I moved my target to that of my entry. This proved to be a bad move, as price then capitulated downwards, and I got out at a breakeven trade.

 

So how could you have managed this better than I did? For me, this was an odd trading decision (which sometimes happens with traders), and my usual plan would be to let this trade run, and perhaps move the stop loss up once the trade was in good profits. After the second day and the long black bearish bar, the stop could have been moved to breakeven for a risk free trade; and if you had done that, you would still be in the trade and carrying risk-free profits of around two times the initial risk. You could also have moved the stop to just above the high of the latest bullish candle, but if you had done this, you would have been stopped out for profits just under two times the initial risk. Whether this would prove to be the best move – still remains to be seen as profits of four times the initial risk could still be achieved on this one.

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