Learn how traders let the market decide

3 min read

Dear Traders,

We hope that you are having a good trading week!

It is our goal for 2016 to provide you more information, analytics and advice and we promised ourselves to give you regular “tips of the week” as well.

One of the things we see occur over and over again is when traders exit a setup too early or late. Do you recognize yourself? Do you too cut your winners short and let your losses run?

Our best advice sounds simple but the reality is tougher: “use a trail stop loss and let the market decide“.

pic_trailing stop

Trail stop loss basics

Of course, do not use a trail stop loss immediately aftering a trade…. this will never give sufficient time for a trade to develop. A setup needs that time, otherwise it can never grow and mature… but a trader needs to strike a balance as well: a trade should not take too long either.

This rule of thumb depends heavily on how you trade and what system you implement. There can be tons of variations that have their own specifics. However in general, the longer a trade is open, the riskier the trade becomes if the setup has not moved into a profitable area.

Our method for trail stop losses

We use the trail stop philosophy that says:

  1. PATIENCE: be patient at start of trade because otherwise the trade can never have a chance of surviving
  2. LESS SPACE: eventually, we want the trade to go our way, because the odds of a retracement going against us increase quickly if the setup takes too long /
    we therefore try to move to break even and take the risk off the table
  3. PATIENCE: once the trade is out of risk, we can lean back a bit and give more space to the setup which help increases the chance of the trade ending up as a bigger win
  4. LESS SPACE: once a setup is moving again in our favor, we use a tight stop loss again to maximize the reward and give too much profits back to the market

Please see this video down below for more information and details regarding trade management.

Thanks and good trading,

Nenad and Chris

Twitter: @elitecurrensea

Youtube: Elite CurrenSEA

Live webinars at: Admiral Markets

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