The Guide

Trade Management

Once an Entry Bulletin gets you into your trade, the Management Bulletins help you to reduce risk and maximize the profit potential in the trade. The most demanding aspect of trading is managing your trades. “Where do I place stops? Where do I take profits?  Should I add more contracts?” 

The Bulletin offers you tried and true trade management that will get you the maximum profit out of your winners and minimize the drawdowns on trades that go wrong.

Profit Taking and Trade Exit

When to exit a trade is always a difficult question. Longtime professionals incessantly question the ideal exit points for their trades. Part of the answer to the vexing question of exiting is found in how many contracts you trade at entry. If you trade single-lot contracts, you must exit after a certain dollar amount is gained. You cannot allow a retracement (that may turn out to be a market reversal) to rob you of your tenuous gains. 

When you trade three or more contracts, you can take the dollar gain on the first contract, lower your protective stop to break-even for the second and third contracts, and lock in a winning trade with the potential that the market may run with the remaining contracts. This is an optimal situation.

Remember, if you trade one contract lots, you must exit after a certain dollar gain. If you do not, you will be guilty of being greedy, and you will become a market statistic.

The Daytrader’s Bulletin assumes you trade a two or three contract set, although you may trade one or more contracts in a set. It is advantageous if you trade a three contract set, four contract set or a five contract set. Above this, you should trade multiples of five contracts in a set. If you use these contract set sizes, you will gain better fills both entering and exiting your trades because these are the lot sizes that are normally traded on the floor.

If you trade a one contract set, you must slowly and patiently increase your account size so that you can eventually trade a two contract set.

In multiple contract sets your net profit, percent profitable, win/loss ratio, and average winning trade amount all increase substantially compared to single contract sets.

A major caveat to increased profitability trading multiple contracts in a set is that you must have a winning strategy. The Daytrader’s Bulletin gives you a winning edge with precise real-time buy and sell recommendations.

Placing Stops

Many traders prefer mental stops to stop orders for protection.  Some traders feel that by having a stop order resting on the floor, they are vulnerable to a run on their stop, and, in many cases, they are correct.

If you want to use mental stops, you need to be aware of the amount of slippage that occurs from the time you pick up the phone until you receive your flash fill.  Check the time it takes to place a market order on a number of occasions and average this number.

If it takes one minute to get your fill, then see what dollar range the current 1-minute bars are on your chart. This dollar value will be your probable maximum slippage in that market, at that time. If that amount of slippage is comfortable to you, then by all means use mental stops. You should subtract this slippage amount in points from the protective stops that the Bulletin recommends in its trades, and call in the protective market order when price reaches that level.

Please be aware that in some market conditions, price can move very rapidly against your position and, with no stop in the market, your trading account could suffer.

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