Managing the Trade

This is the last of the informational setup posts. We'll cover the rest as we go along.

This post is about Money Management.

One day when I was down on the floor in the Bund pit there was a big local (big = he traded large size) who was bored and stood in my face and said: " I'm 38 bid and ask for 100. What do you want to do?" He was saying he would buy or sell 100 contracts at 38 and he didn't care which. He knew that all he needed to do was to get the trade on and then manage it. This reminded me of what I had learned from Pete Steidlemayer (inventor of the Market Profile). Pete told me: "Just get the trade on and then manage it". All experienced traders know that trade management is the most important part of trading.

But what is Managing the Trade or Money Management? Basically, it's how you exit the trade. Not just a stop loss but the plan of how you exit at a profit and at a loss. See the word "plan" in bold? I know my exit plan before I put the trade on. Its programmed into my trade platform. But I amend my plan as I go along to fit the Order Flow but always staying within the mathematical parameters I have calculated to make sure that my edge makes me a profit over time.

As I said earlier, I scale out of trades. This way, I am fairly sure of a profit on at least part of my trade. I can also adjust the targets on the second and third parts so that if the trade runs, I can maximize the profits.

Another way to trade is to trade larger size and exit the whole position at the same time. This way, you are getting a profit on the whole position.

Which method my daughter finally chooses will depend on the maths of her trade as well as her comfort zone.