What is Trading Management?
Trading management or Trade management is all activities a trader carries out after entering a trade, to help increase the chances of attaining profit and reduce the inherent trading risk.
This is quite different from order management since order management is more of the activities that a trader does before entering a trade.
A favorable number of traders are usually positioned on the right side of the market the time they are entering a trade, however, almost 90% of these traders tend to lose so much in the markets.
The main reason for the loss is that nobody – either among themselves or in the market- guides them through good trading management when they make their entry into the market.
Debatably, trade management is the key success factor in the markets, and it could either build you or break you.
When you are aware of a high probability trading plan such as price action, it is important for you to know the way you will manage your live trades.
Many traders end up in self-destruction and incur unnecessary losses as they turn a blind eye to this important trading aspect.
As the saying goes, ignorance is no defense.
A good price action trade setup could turn into losses if not well managed.
There are people who are good at analyzing the market before taking any trade. However, immediately they have entered the market, an array of emotions creep in, and they indulge in undesired practices that result in losses.
This is why it is important to enhance your trading management skills.
Trade Management Strategies
The main focus of trade management is to ensure fluency with a good trading method as well as the commitment to its implementation.
Bettering the implementation factors could have a great impact on the trade outcome and also improve trade management.
To improve your trade management execution fast, there are some tips to consider.
Make use of Trailing Stops
This is a trading management strategy that usually favors trend followers.
Generally, traders prefer to focus only on the possible gains of a trade as they underestimate the probability of a downside.
This could lead to being unaware when the market set-up pattern fails or changes drastically.
It is therefore advisable to have a trailing stop all the time.
This can be done manually even though the majority of the trading platforms nowadays permit the use of automated trail stops.
A trader can set trailing stops for either profits or losses.
A trailing stop loss ensures that in case a market reverses before hitting your take profit target, there will be some levels of profit that will be locked in.
In case the trade moves against your direction, the losses incurred will also be minimal.
Avoid Focusing on Profit and Loss
Focusing on profits and losses is likely to elicit your emotions.
You can easily attain this by reducing the focus on your profit and loss window (on the trading platform).
Maintain your focus on trading management of possible and existing trades.
This is obviously not easy because the main reason for trading is to earn profit, and it, therefore, seems not practical to avoid focusing on the end-goal.
Traders who put a lot of focus on profits normally make decisions based on emotions, focusing on the impact of decisions on P&L instead of how to use good trade management for current trades.
A skilled/profitable trader is able to spot the set-up clearing before it actually happens and exits fast or even changes the position of trade, awaiting the big reversal move which results from trapping other unskilled traders.
Focusing on profits from a general perspective is also what makes many traders lose money in the market.
This is because they take trading as a get rich quick hustle hence forget about all the work that you need to put in before you can start being profitable.
Scaling Trade Positions
This entails both scaling in and out.
Many times, traders assume their position in one entry as they are afraid of being left out on the maximum gains.
This mainly tends to backfire on late entries since the trader kicks off the trade position with a loss immediately they have entered the market.
However, through the inclusion of a scaling method for the entry and the exit, a trader needs not to depend purely on the market timing in the hope of a good entry.
Exercise Caution when it Comes to Sell Triggers
Why do you think most traders exit trades?
Traders exit a trade for two reasons. Not because of losses or profits but so as to reduce risk due to poor trade management or due to peaking or fizzling out of a set-up.
Even though these reasons appear negative, it is a tested way to define market stocks that are on the highest transparency or a paradigm shift in the trading environment.
A sell trigger should not be determined by whether a trade is profitable or not.
Yes, losses and profits may relate to the two reasons given, but then this should not be the main reason.
In as much as this is not simple to grasp, maintain focus on the trade process and not on the results.
The outcome is largely a result of focusing on the trading process, and when you have doubts, you can exit.
Practice Patience to Avoid Impulsive Actions
Lack of patience in the currency market or any other financial market can be very detrimental to any trader.
Markets normally try to cause fear or greed for traders.
Having patience is a vital factor for traders, although even with patience, you must be careful.
Avoid always going after the price on offer for bids, entries or exits as you play long positions.
Practice how to sell positions on offer into the buyers.
This practice brings back good implementation traits and improves your trading insight for weighing the market and tackling liquidity.
This is among the very key skills that profitable traders get since liquidity is a vital factor. Sometimes I even think it is more important than price.
This is a trading management strategy that could serve you well.
How to Get the Most Out of Every Trade
Every successful trader aims at getting as much as they possibly can from each trade they get into.
Attaining the best from every trade requires that you act with consistency and logic.
It also needs good prior planning of all factors of your trading management.
A clear line distinguishes a trader that trades on the hope of making profit and the one that deals with the real situation of the market by handling what is offered by the market.
It is good to consider how far you think the market could go before making any trade.
This ensures that the market does not easily reverse against you since you are aware of the possible “land mines.”
Understanding price action trading well and knowing how to read the dynamics and levels in the market enables you to make a good estimation of the probability that a given setup has before entry.
Also have in mind that before you enter a trade, you are not very emotional, but this mainly changes when you are already in.
You, therefore, must know that in the long run, you will get the most from trading through managing it the best way you can prior to entry compared to trying to manage it when at it.
Sometimes a good trade management skill can even entail closing your PC and walking away from it if you usually struggle with containing emotions the moment you enter a trade.
Just put your take profit and stop-loss targets and walk away. This way, you will not be tempted to make unnecessary interference in your trades.
When you trade like this, you are able to see your trading edge playing out over time with no foreign interference, and this helps you not to try forcing your desires on the market as the market can’t be controlled.
There is a certain amount of discretion that is associated with trade management.
Always observe the market conditions and the inherent signals keenly.
In an event where there is a clear breakout for a given major level or trend showcasing a strong momentum, you can benefit significantly by trailing your stop.
You should not be trying to milk every dollar from the market. In case the market is ranging, you can just leave it if you do not know how to trade ranges.
Reading the market appropriately before taking a position gives you a good idea of how to manage a trade.
I hope you are now aware of how trade management plays an important role in your trading endeavors. Enhance trading management as you move forward, and you will definitely see positive results.