Today's Quote: “Ask the experienced rather than the learned." - Proverb.

Let’s discuss some of the practical ways to use trade management. By management, we are referring to making changes in the stop after the initial stop is set. There are various ways to manage trades. Some will be better than others. All of them will involve a trade off. You will always achieve one goal at the price of another. The question will always be which makes you the most money.

The trade off will always involve trying to achieve a larger target on trades that work, with locking in as much profit (or minimizing the loss) on trades that do not work. Do new traders err in one direction? Absolutely they do. The pattern is to follow our emotions; and fear of losing gains will make most traders over manage trades to lock in profits at the expense of giving up the bigger moves.

Understand one basic concept. Different strategies and/or different time frames will require different management policies. The larger the run you are expecting, the more room you will need to give the stock and the larger the pullbacks you will have to live through.

We can vary management policies by using different time frames to manage the trade (sometimes, in certain situations), and by using different events on different time frames. The extreme would be to use ‘no’ management at all. Naturally we still have our original stop, but under this scenario, it would never change. We will go into this concept in detail tomorrow.