It’s important when entering trading that your style matches your character, your risk appetite, and certainly your capital.
Setting BIG profit targets is great when you have a BIG account. Unfortunately for most, this approach does not work and of course, you get stopped out, so it’s important to monitor the risk-reward in the trade. Yes, a bigger profit target allows a bigger stop loss, however, the question then is; can you afford it? Plus, will the market provide that BIG profit within your timeframe?
Scalping is another style; however, it is very difficult unless you are a pro trader to manage to scalp and control the losses, or it leads to many small profits wiped out by one large loss!
As most trades will go against you before they go for you…if they are going to, I build my position in zones that I identify from
support or resistance levels, and this allows me to take advantage of the whole move and gain a great average when entering the trade and also exiting the trade. I often break my volume into three when entering my position and then for the stop loss, I have the choice of setting my stop loss against the average or adding three separate stop losses, which will provide overall the same average price. Again, for profit taking I identify the zone and then when it enters, I slowly exit the position, depending on my expectations at the time. I may exit 80% and then let the last 20% run, and sometimes make more on the 20% than the 80%. So why take profits this way? Well, we never know when the market will turn and locking some profit in removes a lot of the pressure! You become more relaxed with the rest of the position. Especially when you are starting out, you need the winners to finance any losers and if your risk reward-reward is a minimum of 1:2 then even if you are only right half of the time, you are still making money😉
Most traders when they start trading use CFDs, which is fine, however, futures and options offer so much more. With the introduction of micro futures, retail traders can open accounts with much lower capital requirements. With CFDs you are generally trading against the broker or market maker, with futures, you are trading against other traders. Futures provide a forward curve allowing me take positions on into next year and I can create strategies on contracts such as oil where I control the volatility and decide how much risk I want in my trade. Options also have unique advantages such as the buyer of the option it is possible to run the position to expiry without having to micromanage the risk. It’s like having a guaranteed stop loss; when you enter the position, you know exactly the most you can lose, and can run them overnight and even weekends with the comfort of knowing what the maximum loss will be. I have my own style of trading options which simplifies how to trade them…removing the need to understand the Greeks!
To find out more, attend our free workshop on Wednesday from 11 am GMT https://us02web.zoom.us/j/82646217806?pwd=cHNQS3dsV1hCZUdiRGtDUUtVeDFiUT09