One topic that often is glossed over when creating your Written Trading Plan, is Open Trade Review. Maybe some traders think they can just do it on the fly, without to much thought and she'll be right mate....
Many traders think they are an over-achiever, to only have a Trade Entry Method and maybe a Trade Exit Method in their Trading Plan, but somehow seem to forget that bit in the middle, of managing your open trade position. The way that you manage your Open Trade Positions, can really increase your profitability and overall success.
Managing your open trade positions with greater efficiency can help you lock in profits before they slip away, and exit positions before an exit signal, before it gets ugly. But how, do you ask......
Well that is the million dollar question, and should be answered in your trading plan, so I can give you some tips to help get you thinking:
Open Trade Review - How Often
One mistake some people make is not reviewing their Open Trades often enough. So how often should you check your trade positions....
Well that can depends on certain factors such as Time Frame you're trading, whether your trading Stocks, Options, of some other leveraged instrument, and whether you are using Options Strategies.
Open Trade Review - Do I still have an Edge
When you first entered the position there would have been some kind of catalyst, signal or Edge that caused you to enter the trade position. Ask yourself, does that still exist, if not why do you still own it. If your Edge is gone, you are better off pulling your capital out and putting it into a fresh opportunity.
A sure sign that you've lost your Edge is when your hanging onto a Trade position, Hoping that the position will move in your favor. Remember its ok to be admit your wrong, reclaim your capital & live to trade another day.
Open Trade Review - Whats the market telling me
I myself used to fall for this trap. Only focusing on my Open Trades and not listening to what the Overall Market Price Action and Sentiment was telling me. With Open Trade Review it is important to understand where the market is at all times, before Entry and while holding the trade position.
Knowing where the market is at can help you trail your stops and also when to take profits.
I hope that you are enjoying this blog series on the “Top 10 questions a Trading Plan must answer“. Below are all the posts in this series:
- What are your Life Goals & Trading Goals?
- What is your Trade Entry Method?
- What are your Trade Exit Methods?
- What type of orders will you use to enter & exit?
- What are your Money Management Techniques ?
- How will you manage your Position Risk versus Reward?
- What is your Process for Open Trade Review & finding New Trades Picks?
- What is your Trading Success Profile?
- How will you Review your Trading System to measure & improve?
- What is your Trading Daily Routine-(Part1 & Part 2)?
Stay tune for next weeks blog on “Finding New Trade Picks”.