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Money managment No.2- managing a trade

Discussion in 'Forex Trading Systems and Strategies' started by Bastian Rubben, Jul 4, 2011.

  1. Bastian Rubben

    Bastian Rubben SunbirdFx Representative

    May 30, 2011
    Likes Received:
    When you set rules for managing a position, you need to separate between two different situations: A. the trade is winning. B. the trade is losing. In this post I will discuss about situation A- the trade is winning.

    I usually take partial profits, meaning that I don’t close the whole position in the first target. Note: I set a trade's targets before I enter the market. Well, lets say that I opened a long position in the EUR/USD of 4 lot at 1.45. The first target I had set was at 1.4580-1.46 ( I never wait for a specific point, you have to be dynamic). If the currency gets there, I will sell half of the position, 2 lots in this case, and let the other 2 lots play. By doing that, I increase the chances for realizing larger profits. However, the second half which is still in the money might turn all the way back to the entry point or even cross to the red zone. To avoid that, I always move the stop-loss order to the entry point (after hitting the first target), so in the worst case scenario the second half of the position will be closed on break-even (though it contradicts some of the technical analysis principles).

    If the left half position continues rising, I manage it like it was a new position. Meaning, I will look for more targets for realizing half of the position (which is 1/4 of the original size) and so on. I usually continue with that system till I am left with an eighth of the original size. Likewise, I set new top-loss orders each time the currency makes a new low.
    Note: I use the same trading management for both long & short positions.

    Good Luck!

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