Chapter 5
Managing the Trade
In This Chapter
Creating trading rules: The five-step plan
Knowing when to take the money and run
Keeping losses under control
Finding out how to adjust positions
In technical trading, you use indicators that help you identify what the price is doing — trending, going sideways, making a peak or a bottom, and so on. Indicators give you useful information about price dynamics, but it’s up to you to build trading rules around them. Indicators are about price changes. Trading rules are about you and your money.
In this chapter, I talk about developing trading rules that match up with your indicator skills, your appetite for risk, and your choice of time frame. Special emphasis is on stop-loss rules — don’t leave home without one.
Talking about managing the trade before I talk about indicators may seem a little strange, but I have a very good reason for it. You may see ads or get e-mails touting “the one indicator that will make you 89 percent in the next three weeks” or “the dirty little secret that guarantees 92 percent profits in a year.” Of course you know better than to believe these silly promotions (don’t you?). Well, all through this book, I show you every single one of these “hidden secrets” and magic flash point indicators. Some of them actually perform as well as advertised, at least sometimes. But they don’t do you a lick of good unless you ...
