Podcast:

How to protect your open trades

In this video:

00:30 – What do you do when you have a run of bad trades?

01:14 – Accepting the rough with the smooth

02:38 – It’s frustrating and hard to deal with

03:11 – Client makes 11% last week on her trading account

04:09 – Losing weeks are a part of trading

04:55 – Don’t go changing your system

05:24 – Stay away from the forums, control your emotions

How do you best protect your open trades to ensure that your winning trades don't turn into losing trades?

Let's talk about that and more right now.

Hi, Forex traders. Andrew Mitchem here, the Forex Trading Coach. Today is Friday the 11th of March. I want to talk about a really important subject, because there's nothing worse as a trader than seeing your trades in really good profit, you've got lots of trades on, let's say multiple trades all open, really good profit, you're doing well, you're happy, and then all of a sudden you might go off to work, or you might leave them open over night, or whatever happens.

Your winning trades have all turned into losing trades

You suddenly find that their all turned into losing trades or being completely stopped out. Really it's quite a gutting feeling. There's nothing worse as a trader, but unfortunately that does happen.

What can you do about it, because it really is quite an important subject? Really when you think about it you've got a few different type of options there.

Using partial closing

One of the options you have is called partial closing. It means closing a part of your trade, a proportion of your trade, when your trade gets to a certain level. It's one of the methods that I prefer myself. When I see a trade in profit and I see it get to a certain level, I can then look to say, "Well, I'm going to close part of that trade out," so you might look at closing a quarter or a half of that trade and let the rest of the trade move up towards its profit target. The great thing with that is you capture some fairly good profit out of the trade.

At the same time, you then have options of course. What are you going to do with the stop loss? Are you going to leave it exactly where it is? Are you going to move it to protect the trade to make sure that it's a smaller loss if it gets stopped out? Are you going to move it to even? Are you going to move it to a guaranteed profit? Now, depending on the time frame of the chart that you're trading, and the actually length of the trade, and the profit target.

Moving the stop loss to lock in profit

One of the very nicest things you can do is to move the remaining position up into guaranteed profit. Even if the trade comes back and gets stopped out, you still make profit. When you think about it, mathematically wise is that the best thing to do? It's a little bit like people who always move to break even. It might be a feel good thing to move to break even, but really is it the very best thing to do? We'll come to that shortly.

First option is a partial closing. Second option is to close the entire position. Certainly we just close it early. You can do that if you wish to.

Should you use a trailing stop?

The other thing you can do is to use what's called a trailing stop. Now, a lot of people think a trailing stop's a really good thing, because it means that you're trading as your profit is moving up and up, you're bringing your stop loss with it. Again, it could be one of those feel good things. The thing I don't like about trailing stops is you're not actually moving your stop loss for a technical reason. You're just moving it up by a set number of pips as the profit moves further and further up.

The downside to closing trades early