BabyPips.com FX-Men Team
BabyPips.com
In forex trading, actively managing open positions is just as important as coming up with your plan. Here are three tips to help you manage your active trades.
1. Stay in touch with the market.
Whether you’re a hardcore technical or fundamentals trader, or maybe a little bit of each, you can’t deny that economic reports influence price action. This is why it pays to keep tabs on the events that pose risks to your trades.
Some say that the market’s reaction to the news is more important than the news itself. But how can you make the most out of a reaction if you have no idea about the news event?
Don’t forget to always pay attention to potential game-changers that might invalidate or at least divert from how you expect your trade to play out.
2. Be flexible with your trading plan.
If you have read the School of Pipsology then you should already know how important it is to be flexible with your trading plan. Of course, being “flexible” doesn’t mean being totally spontaneous and not following your initial plan at all. It just means that you’re making adjustments based on factors that have changed since you made your initial plan.
Being flexible requires you to constantly check the validity of your setups as time passes by. Also, keep in mind that the longer you keep your trade open, the more you expose it to different event risks. How long did you initially plan to keep your trade open? Is your setup still valid after a few hours, days, or even weeks?
Let’s say you spot a potential double top on AUD/USD as an intraday trade. You shorted at the “top” and wait for the price action to go down. But after a few trading sessions you see that the pair is just ranging near your entry level. Is your “double top” still valid, or should you take your profits early?
3. Update your orders and position sizes.
Just because you have the ideal reward-to-risk ratio and the “fool-proof” trading plan doesn’t mean that you shouldn’t also tweak your order levels and position sizes. Remember, you want to minimize your risk.
If one or two factors in your trading plan don’t go your way but you think your idea still has merit, you might want to cut back on your position sizes. On the other hand, if you find that the price action turned out to be better than what you expected, you could also consider adjusting your stop losses or taking partial profits. It would be a lot better if these adjustments are included in your initial trading plan in the first place, but better late than unprofitable, right?
Keep in mind these three simple tips when you trade so you don’t end up wasting your well-thought of trading plans. Before you know it, these practices will have already turned into habits!
1. Stay in touch with the market.
Whether you’re a hardcore technical or fundamentals trader, or maybe a little bit of each, you can’t deny that economic reports influence price action. This is why it pays to keep tabs on the events that pose risks to your trades.
Some say that the market’s reaction to the news is more important than the news itself. But how can you make the most out of a reaction if you have no idea about the news event?
Don’t forget to always pay attention to potential game-changers that might invalidate or at least divert from how you expect your trade to play out.
2. Be flexible with your trading plan.
If you have read the School of Pipsology then you should already know how important it is to be flexible with your trading plan. Of course, being “flexible” doesn’t mean being totally spontaneous and not following your initial plan at all. It just means that you’re making adjustments based on factors that have changed since you made your initial plan.
Being flexible requires you to constantly check the validity of your setups as time passes by. Also, keep in mind that the longer you keep your trade open, the more you expose it to different event risks. How long did you initially plan to keep your trade open? Is your setup still valid after a few hours, days, or even weeks?
Let’s say you spot a potential double top on AUD/USD as an intraday trade. You shorted at the “top” and wait for the price action to go down. But after a few trading sessions you see that the pair is just ranging near your entry level. Is your “double top” still valid, or should you take your profits early?
3. Update your orders and position sizes.
Just because you have the ideal reward-to-risk ratio and the “fool-proof” trading plan doesn’t mean that you shouldn’t also tweak your order levels and position sizes. Remember, you want to minimize your risk.
If one or two factors in your trading plan don’t go your way but you think your idea still has merit, you might want to cut back on your position sizes. On the other hand, if you find that the price action turned out to be better than what you expected, you could also consider adjusting your stop losses or taking partial profits. It would be a lot better if these adjustments are included in your initial trading plan in the first place, but better late than unprofitable, right?
Keep in mind these three simple tips when you trade so you don’t end up wasting your well-thought of trading plans. Before you know it, these practices will have already turned into habits!
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Editors’ Picks
EUR/USD hits two-day highs near 1.1820
EUR/USD picks up pace and reaches two-day tops around 1.1820 at the end of the week. The pair’s move higher comes on the back of renewed weakness in the US Dollar amid growing talk that the Fed could deliver an interest rate cut as early as March. On the docket, the flash US Consumer Sentiment improves to 57.3 in February.
GBP/USD reclaims 1.3600 and above
GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.
USD/JPY drops back below 157.00, as focus shifts to Japan snap election
USD/JPY is back in the red below 157.00 in the Asian session on Friday. The Japanese Yen recovers ground against the US Dollar amid some profit-taking ahead of Japan's snap general election on Sunday. The preliminary reading of the Michigan Consumer Sentiment Index report for February will be released later on Friday.
Editors’ Picks
EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates Premium
The EUR/USD pair lost additional ground in the first week of February, settling at around 1.1820. The reversal lost momentum after the pair peaked at 1.2082 in January, its highest since mid-2021.
Gold: Volatility persists in commodity space Premium
After losing more than 8% to end the previous week, Gold (XAU/USD) remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000.
GBP/USD: Pound Sterling tests key support ahead of a big week Premium
The Pound Sterling (GBP) changed course against the US Dollar (USD), with GBP/USD giving up nearly 200 pips in a dramatic correction.
Bitcoin: The worst may be behind us
Bitcoin (BTC) price recovers slightly, trading at $65,000 at the time of writing on Friday, after reaching a low of $60,000 during the early Asian trading session. The Crypto King remained under pressure so far this week, posting three consecutive weeks of losses exceeding 30%.
Three scenarios for Japanese Yen ahead of snap election Premium
The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.
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