Tweak Open Trades to Maximize Profit and Minimize Loss
Good news: We’ve extended your free “Insider’s Look” at Black Swan Forex (BSFX) through Friday.
That means you’ll get two more days of trade alerts, updates and analysis. It also means you’ll get to see how Wednesday’s activity plays out.
To that point, here is a summary of open positions:
You added a new EUR/USD position, which is working higher this morning.
You were stopped out of a GBP/USD trade with a 50-pip loss yesterday.
Fortunately, though, that loss is more than covered with the profit I recommended locking in by adjusting stop-loss levels on open AUD/USD and USD/CAD trades on Wednesday. And in fact, during a volatile session for the Aussie overnight, we were stopped out with a 50-pip profit.
And that brings me to the subject of today’s missive:
Optimize Success by Adjusting Trades on the Fly
I always recommend you use a simple stop-loss to manage risk in every trade. I cannot stress it enough – it is easily the difference between success and failure, at least for me.
Moreover, it is vitally important to determine your stop-loss before you enter a trade. Two reasons:
- You are most objective about the trade before you have actually made the trade. Your objectivity tends to disappear after you enter a trade. Your mind tends to block, or rationalize away, negative information that may suggest it’s time to exit the position.
- Your risk tolerance should determine whether you place a trade in the first place. Look for a new trade I if your expected risk does not make sense relative to your expected reward.
Place that stop and place it first. Don’t rationalize and don’t risk too much to make too little.
Furthermore, adjust your stop-losses as needed.
Adjusting your stop-loss can be the difference between a little success and a lotta success.
Here’s what I mean:
Imagine you purchased a firearm for home defense. If you learn how to handle that firearm properly, you’ll be far better at protecting your home than if you just left the gun sitting untouched in its case on your nightstand with its receipt.
Just like a firearm, a stop-loss is a tool that will protect you better if you know how to use it.
There come times when you’re in a trade and need to make decisions on the fly. Chart set-ups change, the market mood changes, volatility increases or decreases.
Protect yourself from these things with stop-loss adjustments. I provide updates and adjustments, as needed, throughout every trade. Here’s an example from yesterday:
Here’s my point:
Making adjustments on the fly helps you conserve profits and reduce risk of loss.
Remember: trading is about stacking the odds of success in your favor to help you win over time. This comes with a focus on process, not profits. A stop-loss is perhaps the most important part of the process.
But make no mistake: the stop-loss can be frustrating.
Stop-losses are not perfect, and they can knock you out of a trade that otherwise would have validated your bet and made you money.
But the moment you jettison your stop-loss tactic is the moment you find trouble. It’s a sign your ego is getting in the way of process, as I discussed yesterday.
Your ego always remembers missed opportunities, but tends to forget when your stop-loss saved your bacon from a huge loss or blown account.
Black Swan Forex provides stop-losses for subscribers in every trading idea. And it provides stop-loss adjustments to reduce risk or lock in open profit.
I truly believe this is why its winning trades are 170 percent larger than its losing trades – because of the initial focus on risk and subsequent adjustments.
We provide the tools you need for success.
P.S. If you missed yesterday’s letter on “Knowing When to Jump Ship” — How to Manage Risk Easily and Effectively — click here to learn about 1 simple tactic that eludes most traders.