Trade Management

Discussion in 'Trading' started by SoCalTrader619, May 12, 2008.

  1. Hey Guys,
    Just wondering if anyone could recommend a good trade management methodology...

    For example:
    I buy 1000 shares of stock at 50.00
    I know my initial stop is 49.50
    Risk= .50

    What is the best way to manage this trade so that I ensure a good R:R, and also maximize my profit?

    Should I scale out of half when I'm in profit by .50 (1X risk), $1.00 (2X risk), etc. Then leave the rest for the long term?

    Should I hold it all for larger gains?

    Should I move stop to breakeven after a certain amount?

    Any ideas would be greatly appreciated. THANKS!!!!
  2. sg20


    Some stocks gurus here probably know better than I am, basically I use price action as a stepping stone; I'll keep on long until price reversed to the last high on the trend or on any reversal signal then I'll exit. I don't add to a position but others like to add more after a pull back... I think price action is the key to scale your trades.

  3. Many trading systems recommend following the 2.5:1 or 3:1 ratio religiously. Any modification to this can hurt your profitability and should not happen too often. Much of the homework you need to do should happen before you get in a position. If you are done with your homework and think that you have a good entry, then you should be quiet done. :D
  4. I see lots of people who shoot for the 1:3 Risk to Reward Ratio. I completely agree that it's key to keep your winners sizably larger than your losers. That's not necessarily what I need help with. I'm wondering which money management method would allow me to lessen losses while maximizing gains. For example, if you take some off the table at a certain point, by locking in gains, you are technically reducing risk in the case of a reversal. Right? So, maybe half off the table at 2x's risk... then another quarter at 4-5x's risk, then leave the rest for the long run. This is what I'm struggling with. Figuring out the most advantageous way to lock in profits, reduce risk, and maximize gains. See what I'm saying?