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Trade Management

OK – so now you have determined the size of your position, where your SL and TP orders are and have entered the market, obviously that is only part of the whole trading process – how are you going to choose to physically manage the position size as the trade develops?

Trade Management refers to how we deal with a position once we have entered.

The most important trade management techniques are:

Scaling out – Taking partial profits or losses
Averaging Down – Adding to a losing position
Pyramiding – Adding to a winning position

Good trade management can turn a bad situation into a slightly better situation, and a good situation into a perfect situation. Learning how to properly manage your trades will continue to put the odds in your favor.

Trade management must be part of our system. You need to be able to know in advance what to do on every single situation, what decisions are going to help you out, and what kind of actions you must take under different scenarios. All of these must be well thought out because we need to make sure every decision is taken in our best interests.

Some popular activities (i.e. scaling out) could have negative effects on your trading balance subsequently limiting your profits if they are not applied correctly. In this chapter we will analyze each technique and suggest the proper way to use them

This lesson is structured in the following way:

Section 2: Averaging

A technique developed by stock fundamentalists to trade based on fundamentals!!!

Section 3: Averaging Down

Adding to a losing position.

Section 4: Averaging up (Pyramiding)

Adding to a winning position.

Section 5: Scaling out

Taking partial profits could work either in your favor or against you if you don’t follow some guidelines.

Section 6: Summary

A brief summary of the lesson