As a pro trader, when I am considering a trade and identified my entry price, the first thing I do is calculate where to place my stop-loss as then I can assess if I can afford to take the trade on and what size I should use. Once I have established how much I will lose if I am wrong I then analyse where the market may get to in my favour and if this is at least twice as much as the possible loss then I will take the trade on, if not, I will not execute the trade as my minimum requirement is 2:1 for my risk-reward. Sometimes I may have to settle for a little less and then other times if I sense there is more profit in the trade, I will move my take profit.
I believe in building positions and exiting the position in a similar manner. I deal in zones rather than an exact entry price. First, I will identify where the support or resistance is and then enter some orders just ahead of that price. If I wait for the perfect price, I may be disappointed as it may get close but then rejected before I manage to lock in my position and then that is a lost opportunity. Therefore, I prefer to break my orders into 3 levels. Let’s imagine my support level is 33. I will enter buy orders at 38, 36, and 34 providing me with an average purchase price of 36 if I manage to buy all three levels. I am prepared to lose 8 points on the trade and therefore I place my stop-loss at 28. If it is $5 per point and I buy 5 contracts at each level, then I would lose $5 x 15 x 8 = -$600. If the market turns and moves into profit, I will consider exiting the trade from 52 upwards, depending on how strong I consider the momentum! I could close the whole trade at 52 or sell out 5@50, 5@52, and 5@54 to lock in the same profit. Similarly, for the stop-loss I could sell 5@30, 5@28 and 5@26 which would be the same loss.
Trading should always be flexible rather than rigid as aiming for the perfect price every trade can reduce your profitability. I aim to maximise my profit in every trade, and it is all about taking only high probability trades, quality over quantity.
Create a trading plan, which is just a set of rules that you follow every day. They help to keep you safe by not risking too much in a trade or day and helps to create consistency!
To understand this better why not attend one of Symax Fintech Academy’s one-day workshops where we demonstrate this and many other trading techniques and how to manage risk.