Page 6 - Module 6 Costly mistakes

Module 6 – How to avoid costly trading mistakes

One of the biggest mistakes traders make in such scenarios is to wait to get out at breakeven.
Remind yourself of your initial setup and initial risk strategy. If all you can think of during a loss is to
get out at $100, get out immediately and do not risk losing more.

6. trade management – how to manage your profits and losses

Price move into profit

Trailing Stop
When price has moved into your favour, consider trailing your stop to protect profits and to improve
the risk profile of your trade.

When price is at $110, you could trail your stop to $100 When trailing a stop, the most important
with your Take Profit still at $120. Reward:Risk Ratio consideration is to apply a reasonable
approach. There is no benefit in trailing a stop
increase to 1:1
too soon and too close and running the risk of
experiencing a stop out during a retracement.

Closing a profitable trade ahead of target
If you are like most traders, you probably always close your trade ahead of the actual Take Profit
order. The downfall of this methodology is that if you
regularly close your trades too early, you reduce the
If you close your trade at $110 you have
expectancy of your system. You can turn a
reduced your initial Reward:Risk of 2:1 to 1:1
potentially profitable system into a losing one by
cutting your profits too soon. You can go broke
taking profits!

Price move against you

Cutting a loss ahead of the Stop Loss
Cutting your losses ahead of your stop is something
traders don’t do often enough. Once price moved
A trader who closes his loss at $95 instead of against traders, they fail to see the need to exit the
waiting to see price hits his Stop Loss at $90
has cut his potential loss in half.

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