On Trade Management (Setups, Risk & Market Variables)

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Years ago I was enamored with setups. The thought process was that if I could develop a fool proof setup that crushed the market, I would print money.

It found my setup, and it worked for a while.

Conditions were ripe, and money was printed.

I thought it would last forever, but it didn’t. Just as fast as profits had run, losses accumulated. I was depressed by this development, but it was the best thing that ever happened to me.

That’s because I realized that there is more to trading than setups.

As I analyzed my trades, I realized the setup was effective, but it worked best under the right conditions. When a variable hit that invalidated the setup, I would lose and lose big. However, that’s okay if I knew how and when to manage risk.

This is where trade management comes into play.

Successful traders understand how to manage the trade and the risk.

For example, in a booming market continuation setup work great. Until they no longer do. At some point the market will pullback hard, and a trader can get crushed.

That’s exactly what happened to me with my “fool proof setup” earlier in my trading career. However, if I had known how to manage the trades and risk, I would have been fine. Instead of taking big losses and continuing to trade a setup that was no longer optimal, I would have hedged and limited my risk.

That is exactly what we did today.

In this video I discuss how we rode the big market trend, but also exercised solid trade management and limited losses when the big market pullback eventually came.

 

For more on swing trading check out my swing service at bullionwallstreet.com

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Personal mentoring.

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