The Key to Effective Active Trade Management

 

Here was the general plan:

The key to effective Active Trade Management

The key to effective Active Trade Management

The key to effective Active Trade Management

The key to effective Active Trade Management

I won't go into detail regarding the wider market environment and context within which the trade occurred. It's not the point of the article.

Truth be told – it was a marginal trade at best.

Ideally such a trade would be taken in a market with a strong bearish conviction.

But that wasn't the case.

The environment was poor. There was no clear trend structure in place. And the bias was uncertain, with price showing no clear dominant strength with either bulls or bears.

But I was aware of this. I was in "trade cautiously" mode. Standing aside mostly. With a plan that if I did take a trade it was to be with a smaller position size. This would continue until there was a clear trend structure and some good directional conviction.

We could argue back and forth all day as to whether or not the trade idea had edge. I will accept it was marginal.

But I took the trade.

And it contains a good lesson on active trade management.

So we will discuss it today.

Here are the charts just prior to my entry:

The key to effective Active Trade Management

Here's the entry:

The key to effective Active Trade Management

Here is what I'd like to see happen:

The key to effective Active Trade Management

But what we want to happen, doesn't always happen.

And that brings us to today's lesson:

The key to effective Active Trade Management is knowing what SHOULD NOT happen.

There are two outcomes that SHOULD NOT happen, if my trade premise is still valid.

(1) Price will immediately smash higher and stop me out. Should that happen, I'll just take the loss. It's unlikely that I will have the opportunity to work a better exit.

(2) Price will stall towards the upper edge of the congestion area and then break higher.

The key to effective Active Trade Management

Here's the outcome:

The key to effective Active Trade Management

The key to effective Active Trade Management

The key to effective Active Trade Management is knowing what SHOULD NOT happen.

Then recognising it.

And acting to contain any damage.

If your edge is gone, GET OUT.

Happy trading,

Lance Beggs

 


 

Written by

YourTradingCoach – Admin

4 Comments to “The Key to Effective Active Trade Management”

  1. David says:

    I’ve just completed a post-20 trade analysis and I’m only down 4 ticks (CL) total by “managing” vs “set and forget” (micro-managing?) … BUT … my psychology is a merry-go-round vs a roller coaster. A small price to pay IMO

    • Lance Beggs says:

      Hi David,

      Nice work. Now dig into the details of the 20 trade grouping. Find out which stats need improving the most. And get to work on understanding why and how.

      Damn I love the challenge of this business. πŸ™‚

      Merry-go-round psychology. Ha ha. I like it. Interestingly, I’ve come across people who are just so much calmer and confident with active TM, and others who are that way with passive set-and-forget TM. I guess it’s about finding what is right for our own personality & mindset.

      Cheers,
      Lance

  2. Alan says:

    Hi Lance,

    Thanks for the great article!

    In also illustrates a beautiful trap and an example of a 50% pullback. The low of the 9:49 candle is exactly halfway between the low of the 9:43 candles and the high of the 9:45 candle. It was a nice trap as it went one tick below the previous 3 candle lows, then immediately went higher. Interesting to note that the next candle opened on its low as traders realized the shorts were trapped. The 15-sec LTF chart clearly shows the trap and the strong move higher.

    Have a great weekend!

    • Lance Beggs says:

      Thanks Alan.

      Nice observation. I love these traps where price sets up a little ledge, like the 3-candle low. It’s amazing how powerful something like that is in creating an expectation of lower prices within our mind. And then to see it drop just one tick lower before failing! A beautiful trap. πŸ™‚

      Cheers,
      Lance.

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