Managing Your Trades: How Soon To Close Losers, How Soon To Add To Winners
(c) Ken Calhoun Aug 30, 2014

It's been said that "good trades are usually right from the start". What this means is, if you get into a trade that soon goes against you, the first thing that should come to mind is, "how fast should I take a small stop loss?". Not rationalizing the trade or over-thinking it. Whenever I have a trade that goes against me, I'm thinking 'how do I minimize damage and lose as little as possible', before it does more hurt to my account.

On the positive side, for winning trades the first thing that comes to mind is, "how soon should I ADD to this winning position, to scale in and leverage up even more successfully?". For example in stock swing trades I like to add to winning 15-day high breakouts every 2 points or so. For stock day trades, every .20 - .30 cents. For ES the add-in range may be 2-3 handles (8-12 ticks). For Forex it may be 100-150 pips. Experiment.

When taking stops, I like to keep it tight: no more than 1.5 points for stock swing trades, .10-.40 for day trades; 30 pips for Forex
and 6 ticks for ES. "Tight is right". Write that down. :-)

It's really quite simple.

Got a red trade? Ask yourself: "How close do I put in my protective stop loss, to minimize damage?".
Got a green trade? Ask yourself: "How soon do I add to this, to leverage up in a winning uptrend continuation?".

This applies for intraday as well as swing trades, across multiple markets and instruments.

The key is remembering to take ATRs, price elasticity, sector/fx correlations and price-action patterns into account, and using candle and western momentum breakout patterns to make smart trading decisions as you grow your account with specific wins vs stops.

Another main point is to use your unrealized P&L as a key decision-making tool once your trade is executed, not just horizontal s/r levels on charts. I keenly watch the money flow in my trades with the unrealized P&L column once a trade is in play, to make follow-on trading decisions for stops vs scale-ins.