To Manage or Not to Manage, That is the Question…

Filed under: Learn Forex Trading |

For today’s forex-related article, I would like to explore the question of whether it is better to manage your trades, or simply to let them run to a logical conclusion by either hitting your stop loss or your profit target.

 

The main problem with managing your trades is that you allow yourself to be on a rollercoaster ride and you have to watch the trades as they ebb and flow. It is much easier to get emotional with your trading if you are constantly watching your trades, and that is something that we do not want. Although there are benefits to managing trades, such as being able to go to breakeven and in effect, getting a “free” trade, there are also other negatives. For example, if you go to breakeven too early, you are not allowing space for the trade to “breathe”. Consequently, a great deal of your trades will come out as breakeven and you will restrict your profit potential.

 

I find that it is much better to use a set and forget kind of strategy. If my risk-reward is 1:2, I simply set it and forget it and let it reach a logical conclusion. However, if my risk-reward is 1:3, I go to breakeven if I can when it reaches 1:2. And if my risk-reward is 1:4 or more, I do as before and then trail my stop so that it is always two times my risk behind the price. This gives it plenty of space to breathe.

 

So in answer to whether or not we should manage our trades, I would say yes, to an extent, but try to limit that management and don’t watch your trades too much. If you do, you will become too emotionally involves and make some bad decisions. Try to make all of your decision before you put your trade on and stick to them. That way, you will become a less emotional trader, and most likely, a better one.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>