In trading, actively managing open positions is just as vital as coming up together with your plan.
Listed here are three tricks to allow you to manage your energetic trades.
1. Stay in contact with the market.
Whether you’re a hardcore technical or fundamentals trader, or possibly just a little little bit of each, you possibly can’t deny that economic reports influence price motion. That is why it pays to maintain tabs on the events that pose risks to your trades.
Some say that the market’s response to the news is more vital than the news itself. But how will you make probably the most out of a response if you’ve gotten no idea concerning the news event?
Don’t forget to all the time concentrate to potential game-changers that may invalidate or at the very least divert from the way you expect your trade to play out.
2. Be flexible together with your trading plan.
If you’ve gotten read the School of Pipsology then you must already understand how vital it’s to be flexible together with your trading plan.
Being “flexible” doesn’t mean being totally spontaneous and never following your initial plan in any respect. It just means that you just’re making adjustments based on aspects which have modified because you made your initial plan.
Being flexible requires you to consistently check the validity of your setups as time passes by.
Also, take into accout that the longer you retain your trade open, the more you expose it to different event risks.
How long did you initially plan to maintain your trade open? Is your setup still valid after a couple of hours, days, and even weeks?
Let’s say you notice a possible double top on AUD/USD as an intraday trade. You shorted on the “top” and wait for the value motion to go down.
But after a couple of trading sessions you see that the pair is just ranging near your entry level. Is your “double top” still valid, or should you are taking your profits early?
3. Update your orders and position sizes.
Simply because you’ve gotten the best reward-to-risk ratio and the “fool-proof” trading plan doesn’t mean that you just shouldn’t also tweak your order levels and position sizes. Remember, you wish to minimize your risk.
If one or two aspects in your trading plan don’t go your way but you think that your idea still has merit, it is advisable to reduce in your position sizes.
Alternatively, should you find that the value motion turned out to be higher than what you expected, you would also consider adjusting your stop losses or taking partial profits.
It will be so much higher if these adjustments are included in your initial trading plan in the primary place, but higher late than unprofitable, right?
Bear in mind these three easy suggestions once you trade so that you don’t find yourself wasting your well-thought of trading plans. Before you already know it, these practices can have already became habits!