Trade management and discipline is an essential part of successful trading. It is easy to loose focus of your initial trading plan and make knee jerk decisions when you are in a position, but sticking to a proven plan is an easy way to control risk and trade consistently. Today we have invited Forex expert Casey Stubbs, a man with a trading plan, to share with you how he adds to a position. Be sure to comment with your own tips and visit Casey at Winners Edge Trading.
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I have found that trade management is one of the most important tools a trader can use to improve their trading profitability.
There are many trade management techniques that may be implemented. For the scope of this training I am going to focus on adding to a position. The technique helps to leverage my trades for increased profits.
Steps for adding to a trade:
1. Have clear entry point, Stop Loss, and targets as defined by your trading plan.
2. Must not exceed your predetermined risk parameters.
3. Have predetermined set rules for adding to your trade.
How I do it
1. I first split my trade risk in half and open the first half of my position.
2. If the requirements for my trade are still in place I then add the second half of my trade at the correct time.
3. Note the adding will be done if the trade is positive or negative.
Example
Enter on a daily trade setup (see Chart Below)
After Entry price moves against you 50 pips begin looking for an opportunity to add.
Wait for the entry requirements to confirm a re-entry as long as it does not pass your initial stop loss. (see example)
• Keep the stop loss at the same technical level as the initial half.
• Since Stop Loss is shorter adjust trade size to equal the same amount of risk as the first half.
I hope you have been able to take something from this lesson that you will be able to apply to your own trading. For more of my trading tips and for a free trading profile to discover your strengths and weaknesses visit me at Winners Edge Trading.
Best,
Casey Stubbs
Winners Edge Trading
I hope you recieved my previous message as I really need a worthwhile response.
I also am a firm believer that averaging down is incorrect.
I do believe in the sell half theory:
E.g. NOG, cost basis 6,7,&8
Sold at 27. Told broker to sell half, he sold all./
My preferene is to sell half at the first doubal
and sell 1/4 at the next doubal. Put in a stop order
at a chosen level and let the last 1/4 to!!!!!
What is your opinion? How can I improve my technique?
Coach me please as I am into clearfield and plan to do
a similar play. Needles to say my gains go into Presbertyian homes bonds,
which yield 6+%. So far I can't find a better yield with the safety record of
Pres homes.
My purchases come out of my bond income cash flow.
I am looking forward to a constructive recommendation.
DB*******@co*****.net
Yes,Manfred, I totally agree. You don't want to add to while in a losing position. On history charts it is easy to argue of course.
Averaging in is definitely the way to trade.
However I don't beleive in averaging down in a position, only exception a scale trade where the commodity is below production costs. If trade hasn't gone your way don't touch it, wait for it to recover or for the half position to hit stoploss. Averaging down means you want to "get even" with the market and forcing to make your paper losses back.
Amateurs average down in a losing position = not cutting losses while small, proffessionals average up in a winning position = letting winners get bigger.