Trade management is all about how a trader manages his trading activity to maximize his potential profit and minimize the risk of losing profit. Here are valuable suggestions that can help in applying trade management principles in a trading activity situation.
When your trading in that day is indicating losses, it is vital to place a stop-loss because at the end of the day, if you do not order for a stop-loss, it is more likely that your account will be wiped out by the trade losses that you have experienced. Managing a stop-loss order is applying when to place a stop-loss, which refers the closing of a trader’s position as a result of the losses incurred during trading and this application is needed in order to prevent the trader’s account from being wiped out at a time when his trading is experiencing a low level of amount of losses. So when you place the stop-loss order, adjust at 2-6 pips below the most recent low, if you’re doing a long position, but if you’re doing a short position, place your stop-loss order at 2-6 pips with the addition of spread above the most recent high. A pip is a standardized unit, which is the smallest amount by which a currency quote can change that is $0.0001 for US dollar related currency pairs. Traders are protected from losses due to the inherent volatility of Forex trade by the stop-loss order mechanism.
When you do not make an immediate action when trading goes into your favor, chances are instead of winning you might end up losing; for instance, situations during trading that after a series of small variations in prices, the trade begins to move in your favor, which is giving you the winning position, when suddenly the price reverted back to its old price before you can react to secure your profits, in which case, this is a classic example of a winning position that resulted into a loss. In order not to experience this kind of situation, when the price goes in your favor, place immediately your stop-loss order, before the price can revert back and result to a loss for you.
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Kinds of price movements vary in a Forex trade, these are: the up movement or uptrend, the down movement or downtrend, and the range movement, where the price moves up or down within a specific range. These movements help to signal the trader when to put a stop-loss order when prices are going up in his favor. When you are seeing a downtrend movement and the price continues to go down not in your favor, wait for a while for the price to revert back or retrace itself, but if it continues to go down, adjust by putting a stop-loss order; in this way, the stop-loss mechanism enables you to accumulate profit while preventing loss.3 Trading Tips from Someone With Experience