Taking What the Market Gives You

Filed under: Learn Forex Trading |

Screen shot 2013-04-11 at 10.56.59In the commentary of my live trade today on the EUR/USD pair, I made mention of ‘taking what the market gives you’, and I would like to talk a little bit more about this idea today.

 

There are two basic ways that you can manage your trades once an order has been filled – you can either set a stop loss and a target, and then let your trade run without interference until one or the other is hit. Or, you can attempt to ‘manage’ your trades.

 

For complete beginners, I would probably encourage a set and forget type strategy, but once you get more screen time, it might be prudent to begin to manage some of your trades, and ‘take what the market gives you’. For example, let’s say you enter a long trade after a bullish pin bar formed at a significant level of support resistance. The trade moves in your favour, and you are in profit to the tune of $200, but your target is set at $400. Things are going well. However, price now forms a bearish engulfing pattern and you are now only in profit by $100. It is time to take action. You could either move your stop loss to breakeven as an insurance policy, you could take the $100 profit, or, you could move your stop loss up to the low of the bearish engulfing pattern, and see what happens. The important thing is that in each scenario, you are listening to the narrative of the market, and reacting accordingly. By making decisions such as this, your bottom line profit/loss figures may well improve, depending upon your skill as a discretionary trader. However, we must accept that targets will not always be met, and that the candles do not give price targets, but merely tip us of to the likelihood of a turn in market sentiment. Well, that’s it for today – more tomorrow.

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