RISK is reality-This is always a cost associated with finding out ,what market is going to do next.
Risk management - simply mean keeping losses and draw downs to an absolute minimum while making the most of opportunities for profit.
1.Enter the entire position at once! This means that if you trade in multiple contracts, put on the whole position at the same time. Do not add to winning positions.
2.Initial protective stop -Best time to put a stop is before you put the trade on.No Subjective decision making.
3.Immediately look to scale out of your trade as the market moves in your direction.By taking some of the trade off, you are decreasing your risk and locking in profits.75% of trades test out best by taking your profits quickly.
4.The exact timing to exit a trade is a subjective matter.
5.Best time to put a stop is before you put the trade on.
6.Stop loss is essential risk management mechanism ,it should always be there.
7.Shorter the time frame, the less justification for trailing stops.
8.The fewer decisions that you can make during the trading day, the better off you will be.
Stop Placement
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1.Place an initial protective stop on the entire position one or two ticks below the most recent high or low (Risk Point).
2.Time stop should be maximum 5 trading sessions.
3.Trailing stops (3/12ema) -golden and death cross.
4.Candles that can be used as Protective stops (Risk point)
Highest high of Doji and prior candles for resistances
Low of hammer as support
Highest high of shooting star
Bullish engulfing pattern: - lowest low of two sessions
Piercing pattern - lowest low of two sessions
Bearish engulfing pattern: -highest high of two sessions
Dark Cloud cover -Highest high of two lines that makes up the pattern
Morning star -Low of three candles
Evening star-Highest High of three candle
Exit Strategy
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1.Market structure tested at least twice.
2.Candle stick bullish reversal pattern:-
Bullish Engulfing ,Piercing Pattern ,Bullish Harami ,Hammer ,Inverted Hammer ,Morning Star
3.Candle stick bearish reversal pattern:-
Bearish Engulfing ,Bearish ,Harami, Bearish ,Dark Cloud Cover ,Evening Star ,Shooting Star
4. Doji
5.Trailing stops (3/12 ema ) -golden and death cross. Trailing stops is used for final position closing
6.If today close -yesterday close is 50 /100/150/200 or more ,then it is time to book profit.
RULES TO FOLLOW
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1. Enter the entire position at once! This means that if you trade in multiple
contracts, put on the whole position at the same time. Do not add to winning
positions.
2. Place an initial protective stop on the entire position one or two ticks below the
most recent high or low. (The market should not come back to this defined support
/resistance level, or "risk point!") The exact timing to exit a trade is a subjective
matter. What is not subjective is the initial protective stop.
3. Immediately look to scale out of your trade as the market moves in your direction.
By taking some of the trade off, you are decreasing your risk and locking in profits.
If you are trading on a one-contract basis, as you should if you are a beginner, move
your resting stop to protect any gains.
4. Important-if the market starts to move parabolically or has a range expansion
move, take profits on the entire position. This is very likely climax!
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