For pros and beginners alike, a strong trading strategy all comes down to planning. You need to research, find opportunities, and make smart trades based on data and analysis.
But building a strong portfolio doesn’t end once you make a trade. This is where an effective trade management routine comes in.
What is trade management (and why does it matter?)
In the simplest terms, trade management is everything you do after you make a trade: holding, adjusting your position size, or even closing your position.
A strong trade management approach relies on planning and informed decision-making. Having a trade management plan in place may help avoid emotional and impulsive trades with your open positions.
Successful trade management requires continual focus, analysis, and learning. Still, properly managing trades is a key component to growing as a trader.
Read on to learn more about effective trade management.
1. Start with a strong trading plan
All strong buildings start with a strong foundation. To effectively manage your trades, your trading plan should act as your strong foundation.
Set up trades based on your previously determined risk and profit/loss parameters . Establish your trading routine and follow it. Decide how you want to track your trades and stay dedicated. When you have these basics squared away, you are in a better position to make informed decisions about how to manage your open positions.
2. Keep emotions out of the equation
Have an entry and exit strategy and keep your goals in focus. You may want to consider:Keep all your trades straight and your goals in focus. You may want to consider:
Using different accounts for different trading strategies to avoid confusion and the temptation to differ from your set strategy.
Customizing your trading screen to pick and choose the technical indicators that help you hone in on what matters and cut out distractions.
Building experience and skills in paper trading to ensure you know what you’re doing before diving into the deep end.
3. Manage your position size
Knowing how much money to put into a particular investment is a fundamental aspect of trade management. If your position size is too large, you may fixate on every fluctuation and be unable to focus on anything else. If it’s too small, you may pay less attention to it and get sloppy, mismanaging your trade.
Find the right balance so the trade matters to you but not too much: it’s not wise to let a single trade make or break you.
4. Steer clear of hindsight regrets
Price action in your chosen timeframe is what really matters. Cut out extra noise and avoid post-trade regret and what-ifs by getting caught up if you passed up a trade or sold before the stock climbed higher.
Keep monitoring the market, but accept that you may miss out on some opportunities while potentially capitalizing on others with a strong trading plan.
5. Plan for all possible trading scenarios
Before you ever make a trade, you should have a plan for what to do with that open position. Ideally, you should be prepared to expect the unexpected and have a plan of action in place.
For example, do you expect upcoming news? What happens if there is a rush to sell?
Knowing the support and resistance zones ahead of time may help you to scale your approach and identify your specific buy and trade signals.
There’s no guarantee of success, but having an idea of what you would do in a variety of situations can help you avoid freezing up or impulsively trading based on emotions.
6. Pivot with well-planned order changes
As you monitor the market, make sure you’re ready to act in those scenarios you planned for. For example, take advantage of stop-loss orders for market moves and manage your losses with limit orders. But don’t just set it and forget it – keep an eye on it, and take action when appropriate.
Use the parameters you established in Step 1 to decide if you want to keep evolving your trading plan and decide whether to open a new position, exit your current position, or do nothing. For example, continually assess each open position to consider if you may want to keep a portion in the market and take a partial profit if you have any unrealized gains.
And don’t forget to keep track of your trades and the outcomes!
7. Reevaluate your goals regularly – and never stop learning
As you keep track of your open positions and how they are impacting your portfolio, consider: Are you still in a position to achieve your investment goals? Do you need to think about changing more than just your trades?
For instance, are the tools you’re using meeting your needs? Do you need to add a new strategy for more timely trades or add another technical indicator to help gain better insight? Do you need to cut anything out for better focus? Have you learned anything from recent trades that you want to understand better?
Taking time to analyze these factors helps you better understand how you’re really doing and find weaknesses to work on or new areas you’re interested in exploring.
Take your trading to the next level with moomoo
We all love when a plan comes together – and a solid trade management plan can help traders make organized and informed trading decisions, which may lead to being in a better position to achieve their investment goals. But you need the right tools to build your trading plan and effectively manage your trades.Moomoo offers pro-level tools and technology to help you take your trade management strategy to the next level:
Find new trading opportunities and stay up to date with real-time market data as well as over 100 technical indicators and drawing tools.
Discuss ideas, concerns and wins, and lessons learned in our global community of over 20 million* users.
Build your skills, test out new strategies, and never stop learning with our in-app education for traders of all levels and paper trading tool.
* Users of Moomoo Technologies Inc. and its affiliates as of 05/2023.
All investing involves risks regardless of the strategy selected and past performance does not indicate or guarantee future results. Moomoo may share or provide links to third-party content. Doing so is intended to provide additional perspective and should not be construed as an endorsem*nt or recommendation of any third party website, strategies, services, products, guidance, or opinions
