I've talked about how important it is to have a trade plan before and how that should definitely include a trade management plan for individual trades too. This article touches on this topic again with an example from a couple of trades last week.
Last week I talked about how price had engulfed a daily demand level and I was looking for a short given that there was profit potential below. You can find that post here. After being stopped out for a loss, I then successfully shorted the pair twice more to secure profits.
In this trade below and I entered at 15m supply and trailed my stop behind 15m supply as usual. This was a pretty standard trade.
The next trade was slightly different. Although I followed the same analysis and entry etc according to my rules, I used an alternative exit strategy and I'll show you why.
This was pretty standard
This was not.
If I were to trail my stop behind 15m supply on this one, I would have been out at BE or worse a loss. Price dropped over 200 pips in a very short space of time and it dropped into a buy zone. Whilst this doesn't necessarily mean that price will reverse, I like to exercise caution and follow my plan. When the market moves like that it can often have an equal and opposite reaction. As we saw in this case, price moved just as quickly and just as far but in the opposite direction.
With no 15m supply to trail, I looked to the 5m. There was no 5m supply for miles either so I looked down at the 1m chart. There I found a 1m supply to move my stop to.
Why not just exit in the buy zone?
My plan is designed in such a way to make the most of market moves by taking action when the market shows me to. This is why the engulf is so important in my trading. It helps me get in and it helps me get out. Rather than just act on what price might do, I wait for price to show me what is likely to happen.
I hope you found this useful.
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If you need help developing a trade plan feel free to contact me. I'd be happy to help.