Ever look at the market a few hours after closing the trade and feel like this guy???  OR, have you ever waited too long to close a trade after watching your profitable trade fall apart and felt like this guy????

Don’t worry, you are FAR from alone!!

One of the members at Forex Mentor Pro just asked me a very important and incredibly difficult question “What’s the best way to manage a trade in the gold market?”  What makes it so incredibly difficult is because there is absolutely no right or best answer for that question.  So rather than spend time answering it here, which is simply impossible, I am hoping to inspire you to come up with your own solution by talking about the factors involved in great trade management.

Entries themselves fall into only two categories:  buys or sells.  Two choices, get it right (which theoretically could be done at random with at least decent results) and you should win right???  WRONG!!!  Although picking the right side of the trade only comes down to 2 options, what happens next has infinite possibilities.

I have yet to meet someone who has the “holy grail” of trade management. We are in a conundrum: How do we protect ourselves from volatility and reversal while allowing our trades to run in the case of a big move???

No easy answer. FIRST OF ALL, and MOST IMPORTANTLY, remember: Trading is SUPER EASY in hindsight. When sitting in a live market, we simply can’t predict the future. Can’t, never, nope. We might see a big move in the next 2 hours, or we might see a reversal. The answer is finding a balance you can live with and not beat yourself up over. DO NOT beat yourself up for not catching every pip of a big move!!!!! The fact of the matter is that since we cannot predict the future, we also cannot blame ourselves for not taking advantage of what would require that ability.  We simply must try to make the most of the move and limit our losses.

There are Several Popular and Functional Approaches That Work:

Trader #1 is an amazing trader and his philosophy is: Set target, enter trade. Done. He picks a s/r area for a target that makes sense on a high timeframe and the rest be damned.

Trader #2 is an amazing trader and is philosophy is: Get trade to b/e as quickly as reasonably possible, cut out 1/2 and let the rest run.

Trader #3 is an amazing trader and his philosophy is:  If trade goes X pips, I move stop to Y.  If it goes to Z, I then trail by Q pips.  This is a purely mechanical approach based on set amounts.

Trader #4 is an amazing trader and his philosophy is:  When indicator A tells me B combined with indicator C telling me D, I close the trade.

Please keep in mind this list is not an exhaustive view of different approaches but they all work, although they all have strengths and weaknesses.

OK, if you KNEW how many days I tell my wife “Honey, I made X in dollars, but I COULD have made Y if I had only stayed in longer”. OR I say “Honey, I was up X dollars but held on too long and only made Y” She almost ALWAYS tells me “Shut Up Omar, you made a great gain, be happy”.

We will ALWAYS doubt ourselves based on information we didn’t have when we actually had to make the decision. There is no right answer. You just have to keep improving. Split your trade next time. Manage one trade mechanically, and manage the other based on what the last candle closed at. Create a rule like “if hourly close looks like a reversal, close the trade” OR “If hourly candle bearish engulfs the prior one, close the trade”. Experiment with different possibilities. But whatever you do, DO NOT, AND I REPEAT DO NOT beat yourself up for not being able to predict the future. If you are making money, DON’T WORRY ABOUT what others are making. They are not paying your bills and you don’t know what their losses look like. Risky traders usually get the home runs, but also have to eat more losses along the way to get there. Find the balance that makes you NOT beat yourself up.

It comes down to making your trading approach fit your personality and risk appetite.  You should base your approach according to questions like “Do I want to protect my trade more at the cost of potentially getting knocked out a lot?”, “Do I want to not fiddle with the stop so I can catch big moves at the risk of getting stopped out for a loss on what is sometimes a winning trade first?”, “Do I want to trail my stop, or try and always get taken out at take profit?”  It is up to each of us to ask questions like these to find the right answer that works for us.

In the end, our goal is gains.  We must constantly work on our approach so that we are improving and becoming more profitable.  Trade management is just a skill that you can never stop working on.  So instead of wanting to put that gun to your head, remember the answer is out there, even though it will never be the perfect one.

By: Omar Eltoukhy

GOLDTRADEMASTER.COM

The Trade Management Conundrum