How to Manage Place for Stop Loss and Profit Targets

1. How to Manage Place for Stop Loss and Profit Targets How traders place the profit targets and protect capital with a stop loss trade management is an essential part of doing the business in successful active trading. If proper risk management is not executed, a profitable trader can end their career within one or two bad trades. It is necessary to understand and accept the fact that losing trades are a fundamental part of trading and nothing more than the cost of doing the trading. The main reason a trader will not make it as a professional trader is that he or she personalizes a trade that is not gaining money, turning a losing trade of what could have been a just small loss into a career-ending disaster. Successful traders often say that “Plan your trade, trade your plan.” Setting a stop- loss and profit target before executing a trade allows to traders to measure the proper risk/reward scenario. To further explain, a stop loss is an order to exit a trade once a trade failed. It is a dollar amount you must take before you place the trade. At this point, you have accepted the risk and the fact that there may be a loss on the trade. 3 Basic Stop Loss Strategies Initial Stop Loss: Risk point is defined by the original entry 1. Break-even Stop Loss: When a position moves in your favour, you move the stop loss point from the original spot to break-even area. 2. Trailing Stop Loss: Used to protect profits in a winning position.

2. A trader must execute the factor flawlessly as proper management of your losing trades will deliver what you take home every month, not how much you make on the winning trades. What the translates to is that when it comes time to execute a stop loss, you must do it without any emotion because you understand it is a part of making a trade. The common reason traders blow up their accounts are too much leverage related to their skills and not accepting the risk. Setting the profit targets is also important as it is overall plan to maximize risk vs reward in a trade. Without having the target set, you run the risk of letting a winning trade turn into a loser. The skill of booking the profits is one of the hardest to teach for the reason that it can be subjective than the setting a stop-loss. A few profit taking scenarios An Exiting at a defined support or resistance area on a chart, such as a previous high or low. 1. Scale-out of a good trade, if you still like it, you can always get back in. 2. Exit into momentum moves looking at the exhaustion candlesticks and volume. The bottom line is that a trader should always know when they plan to enter and exit a trade before executing. By using the stop losses effectively and setting profit targets, a trader can minimize losses and maximize profits.