This month's theme is "Trading Setups", and one of the most important aspects of any trading setup is how one manages a trade once a position has been entered into.
We've all heard the old adage that we need to "cut our losers short, and let our winners run", and in a previous Weekly Perspectives, we've written about the importance of how this plays into risk management.
However just as challenging for some traders is what to do when faced with a winning trade. How does one balance the desire to keep hard earned profits versus taking the sure winner then sitting on the sideline and missing out on the big move?
Unfortunately, there is no right or wrong with regard to this aspect of trade management but simply tradeoffs.
There are many ways to construct profitable trading systems that can involve either taking quick profits or letting winners ride.
The emotional temptation, however, is to flutter back in forth between both approaches and in the end being consistently wrong with every market turn.
The key is to remain consistent with the approach that one takes.
There are a plethora of trailing stop approaches from price action/market structure based, fixed $ or %, moving average based, ATR (average true range) based, Parabolic SAR, etc. so in this week's lesson, I will share one of my personal favorite trailing stop methods which uses fixed units of risk to manage one's trailing stop.
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