"Managing Trades Should be a Simple and Repeatable process to maximise Profits Consistently"
Managing Winning Trades or even Managing Losing Trades is a skill most traders leave until last in their priority of learning. Most traders, whether forex trading, futures trading, stocks trading or even just lately, cryptocurrency trading, concentrate on the signals and not how to maximise profits when in these trades!
Like our founder, Paul Bratby, states;
“Any untrained trader can get in a trade, but 95% of them panic and get out too early”
Managing Trades Should be a Simple and Repeatable process to maximise Profits Consistently.
Trade Management is everything a serious trader does after a trading position is opened until it closes. From “Cradle to Grave” if you like. By managing trades, traders can maximize their profits, whilst minimizing risk. This has to be conducted in a simple and repeatable manner so as to use the same set of rules every time a trader is managing trading positions.
Please don’t get confused with “Risk Management” as this should have been done before entering a trade as part of the entry strategy. We don’t classify determining position size as part of trade management as this should clearly be done as part of a traders risk management exercise when formulating an entry strategy.
So let’s keep this purely to managing trading positions when they are open and assume the entry strategy has been conducted and executed correctly. To manage trades we need to understand the behavior of the given instrument we are trading. In effect, it is a live story, unfolding before your eyes and the main players in this story are Price Action and Volume. Of course market opens, data points and news will play a part in this, but traders will see the reaction to these with both price action and volume combined.
Let’s talk about volume first.
A Simplistic view of volume is like throwing pebbles at a glass window. Throw one small pebble and it probably won’t smash the window, but lots of different size pebbles and the window is likely to smash. If one investor places an order to buy 100 shares of stock or 10 contracts of a futures contract at the current Ask price, the instrument may not move up.
But, if 10 investors all place buy orders of different quantities, the stock is most likely going to move up in price because there are not enough sellers and the Brokers need to entice sellers to sell with higher prices…. Obviously this works in reverse when an instrument is selling off, going short.
Price Action is the result of this lack of buyers or sellers, that makes the broker have to increase or decrease the bid and ask prices. So, for example a candle that has a higher high and higher low than that of the previous candle, has a bullish direction as usually explained with price action. But the reason for this is that the broker had to entice sellers of the instrument to sell by increasing the price and therefore the price went up. Then we ran out of sellers again, so the broker had to increase the price again to entice sellers. At some stage more traders see this behavior and we get more traders wanting to buy but, again, not enough sellers and so you see the picture.
If we can see the volume for each candle has increased compared to the previous candle, it is classed as an accumulation candle. So traders are accumulating more shares/contracts at the ask (putting in buy orders) than that at the bid (putting in sell orders). If this happens on multiple, consecutive candles then we say it is pretty strong in a bullish direction. Especially if the volume is above the average volume traded in the given timeframe of the candle.
Now when this volume starts to slow down for each candle, we can say that there are less buyers interested in buying the instrument. There are two circumstances that can occur now and they are:
- The Broker has to lower the price slightly to start getting more interest. In this first case, this works and the sellers start to give up some of their positions as the price goes down slowly. This usually has lower than average volume and is classed as “low volume profit taking”
- The Broker tries by lowering the price slightly, but there are very few takers and so he has to drop the price in bigger increments to entice transactions. At this stage some traders start to panic and close all of their positions, thus increasing selling volume. Eventually the scales are tipped and we have more sellers than buyers during the timeframe of the candle. So we get “distribution candles” and usually those have higher than average volume.
With this knowledge we can see that the danger for most traders is that they witness scenario 2 a few times, so when scenario 1 is happening they get out of the trade too early and the price action and volume invariably slows to the downside and it turns back around.
Our Founder, Paul Bratby, has understood and used this behavior for nearly 20 years to maximise profits in his trading positions with Futures, Forex, Stocks and Cryptocurrencies. So he sat down with his developers to formulate a trading indicator dedicated to managing trades and maximising profits with a simple set of rules that are triggered with easy visuals on a traders chart. This is where “The Manager” was born. You can understand how this manger takes all this behavior we just talked about and represents it on your chart by watching the training video for it HERE