Trade Management

Trade management is everything you do with a position between entry and exit. It includes moving stops, taking partial profits, adding to winners, reacting to news and handling your own emotions while money is on the line. Good management can turn an average entry into a solid result; poor management can turn a great entry into a loss. The best management is mostly decided before the trade begins.

Passive vs active management#

Many traders do best with rule based management: active decisions, but defined in advance.

Key management decisions#

1. Initial stop: where you are wrong. See Stop Loss Strategies.
2. When to reduce risk: for example, moving the stop to breakeven after a set gain. See Moving Your Stop: Breakeven and Trailing Stops.
3. When to take partial profits. See Scaling Out and Partial Profits.
4. When to add. See Scaling In and Pyramiding.
5. How to trail the stop on the remainder. See Trailing Stop Orders.
6. When to give up on time. See Time Stops.
7. What to do around news, such as reducing size before earnings.

A sample management plan#

Over management#

Constantly fiddling with stops and targets is one of the most common ways to damage a good strategy. Signs of over management:

• Moving stops closer on every small pullback and getting stopped out of winners.
• Taking profit at the first sign of red.
• Checking the position every few minutes on a multi day trade.

Compare your managed results with what the original plan would have produced. If the plan does better, manage less. See Post-Trade Analysis.

Managing emotions during trades#

• Reduce screen time for longer timeframe trades; frequent checking increases anxiety and impulsive decisions.
• Use alerts instead of watching every tick.
• Size so you can sleep: if a position keeps you awake, it is too large. See Position Sizing.
• Write down the plan so decisions are executions of a script rather than in the moment judgements. See Emotional Control.

News and events during trades#

Before entering, check for scheduled events during the planned holding period. Decide in advance whether to hold, reduce or exit before them. Unscheduled news may require judgement, but your default should still follow your plan. See Trading Economic Releases.

Common mistakes#

• Managing based on feelings instead of rules.
• Moving stops further away to avoid a loss.
• Cutting winners short to lock in small gains.
• Never reviewing whether your management adds or subtracts value.

Managing a trade often means cutting size as conditions change; Reducing a Position covers when and how to do it.

Frequently asked questions#

What is trade management?#

The decisions made after entering a trade, including stop adjustments, partial exits, adding to positions and handling news, until the trade is closed.

Is it better to set and forget or actively manage?#

It depends on the strategy and trader. Rule based active management combines the benefits of both: adjustments happen, but only according to rules set in advance.

How do I know if I am over managing trades?#

Compare your actual results with what your original stop and target would have produced. If the original plan does better, you are likely over managing.

Next, learn how to add to winning positions with Scaling In and Pyramiding.