The PMTW Trade Signals Trade Management Rules Responsible For Extraordinary Profit Potential & Long Term Trading Success
Trading signals, from any source, requires a leap of faith. Since you are not looking at the same charts as the signals provider or privy to the exact trading strategy they are using, you have to “trust” the signals blindly.
And that can be challenging.
I feel that one way to help subscribers gain confidence in the trade signals, and ultimately me as the signals provider, is to be as transparent as possible. That is why I’ve done so much training about my trading approach.
If you’ve gone through the training, you are probably sick of hearing that the trading approach is strategically designed to be profitable over the long term. Basically, I’ve worked to put the odds in our favor as much as possible so we end up on the side of profitability, as long as we keep trading and sticking to the rules.
Part of tipping the odds in our favor has to do with the trade management rules. So, in the spirit of transparency, and in the quest to create confident signal followers, I want to explain the trade management rules in this lesson.
Stop Loss & Take Profit Placement
First of all, each trade has a stop loss and take profit target(s). It is never a good idea to place a trade without a stop loss. So, we always trade with a stop loss to protect our account from dramatic and unexpected losses.
As you probably know by now, I focus on risk to reward. I always want to set my targets higher than my initial risk. Our desire when setting up the trade is to make more money on winning trades than we lose on losing trades.
- GBPJPY: Final target is 5 TIMES the risk (ie. 100 pips stop loss - 500 pip final target)
- GBPUSD & GBPAUD: Final target is 3 TIMES the risk (ie. 100 pip stop loss - 300 pip final target)
- BTCUSD & ETHUSD: Final Target is 10 TIMES the risk
Basically, if things go in our favor, we want to profit MORE on winning trades than we lose on losing trades. That is a major factor in being able to be profitable over the long term.
But trading is not so cut and dry as placing a trade with a stop loss and take profit and letting price run until it hits one or the other levels. This is why we have more trade management rules.
Moving The Stop Loss To Breakeven
I strive to make my signals service something anyone can follow correctly. And a main aspect of being able to follow the instructions exactly is being able to control your emotions when real money is at risk in the live market.
A technique to help with controlling emotions is to move the stop loss to breakeven to eliminate risk on the trade. Once there is no risk on the trade, the fear of losing money is eliminated, making it easier to stick with the trading, emotionally speaking.
Therefore, if price goes in or favor, there is a point where I want to move the stop loss to breakeven to eliminate risk on the trade. I’ve decided that when the price has gone 70% of the stop loss value in our favor, it is time to move the stop to breakeven.
The markets are erratic and unpredictable at times. And it is very difficult to handle emotionally when price goes in our favor, and then turns on us for a loss. So, we can avoid this to some degree by bringing our stop to breakeven if the price goes 70% of the stop distance.
For example, if the stop loss is 100 pips, we would move our stop to breakeven if price goes 70 pips in our favor.
- For the PMTW Forex Signals, I like to move the stop loss to breakeven +2 pips.
- For the PMTW Crypto Signals, I like to move the stop loss a little bit beyond breakeven level.
It is still frustrating to have the price go in our favor and then get stopped out at breakeven. But this is much easier to deal with than ending up with a loss after the price went in our intended direction.
Taking Partial Profits - Or Not
Another way to deal with the emotions of trading is to take partial profits. This means collecting profits on a portion of the trade at some point, and letting the other portion run.
Moving the stop loss to breakeven and taking partial profits means the trade is already profitable. The worst thing that can happen if price goes against you and hits your breakeven stop is you made money on the trade.
Imagine you are in a trade. In the beginning you have money at risk.
Once your stop loss is at breakeven, there is no risk on the trade, which feels good.
But once you’ve made some money on the trade and don’t have any more risk, you feel great.
This situation makes it much easier to stick with the trade in search of higher profits on the second portion of the trade. And since there are subscribers with a wide variety of trading experience, I feel this is a better way to trade for the signals service.
- PMTW Forex Signals employs this partial profits method
- PMTW Crypto Signals does NOT employ this partial profits method
When trading PMTW Forex Signals, you are instructed to take partial profits at the same pip level as the stop loss. For example, if the stop loss is 100 pips, you are instructed to take 50% profits at 100 pips.
Due to the nature of Crypto trading, I don’t take partial profits at all, and only have one target.
Moving The Stop Loss To Lock In Profits
As we’ve discussed earlier, eliminating risk and putting yourself in a situation where the worst that can happen is you make money is a great situation to be in emotionally.
During the course of a trade, you may be instructed to move the stop loss to lock in profits. This can happen at any time when the price has gone in your favor. For example, it might happen before the 70% price level to move to breakeven or before you take partial profits.
One strict rule I follow is that if the price goes 2 TIMES our stop loss distance in our favor, I lock in 1 TIMES the stop loss.
For example, if the stop loss is 100 pips and price goes 200 pips in our favor, I lock in 100 pips profits.
Locking in profits protects us from big moves in the market that dramatically reduces our profitability in the trade. It doesn’t feel good to see a trade with a lot of profit suddenly turn around on us.
The trick with locking in profits is to follow price so we lock in some nice profits, but not so close that we get prematurely stopped out.
Manually Closing The Trade
Most of the trade management rules are created to help us deal with trading emotionally so we can hold into the trade for higher profits. We don’t want to get into the habit of cutting our trades short and losing out on a lot of potential profits.
That being said, there might be a time where we want to take our profits by closing the trade manually. If I see trading conditions change and indications the move might be over, it is time to take our profits and exit the trade.
Therefore, there might be a time when you are asked to manually close the trade. This can happen when in profit or out of profit.
Using The Forex Trading Troll To Manage Our Forex Trades
As you can see, I have some trade management activities that are 100% rules based:
- Move stop loss to Breakeven +2 if price goes in our favor 70% of the stop loss value. (ie. 100 pip stop loss, move to breakeven +2 if price goes +70 pips)
- Take partial profits (50%) if the price goes 100% of the stop loss value. (ie. 100 pip stop loss, take partial profits of 50% of the position size if price goes +100 pips)
- Move stop loss to lock in the stop loss value if price goes 2 TIMES the stop loss in our favor. (ie. 100 pip stop loss, move stop loss to lock in +100 pips if price goes +200 pips in our favor)
Other trade management activities are not so set in stone and can happen at any time:
- Moving stop loss to lock in profits.
- Manually closing the trade.
Again, I’ve spent a lot of time and effort trying to make following the signals correctly as simple as possible. Therefore, I provide a Trade Management Expert Advisor, called The Forex Trading Troll, that can perform the rules based activities for you on autopilot.
Trading off the Daily charts once a day has its benefits:
- We don’t need a lot of time to trade
- We won’t miss trading opportunities
- We shouldn’t mismanage trades
But if the market moves fast, there can be some drawbacks. For example, if the market goes 70% of the stop loss in our favor where we should move our stop loss to breakeven… but then violently reverses.
In this situation, we should have moved the stop to breakeven, but by the time we get to the charts, price is at a loss and the opportunity to move our stop no longer exists.
I’ll admit, these events don’t happen all that often. But wouldn’t it be better if the 100% rule-based trade management rules could be automated? That way, you ensure you stick to the rules after the trade is placed.
I believe this is the best way to trade. Therefore, I’ve created and provided The Forex Trading Troll you can use to automate some of the trade management rules.
The Forex Trading Troll can:
- Move the stop loss to Breakeven +2 if price goes 70% of the stop loss value
- Take partial profits if the price goes 100% of the stop loss value
- Move the stop loss to lock in the stop loss value if price goes 2 times the stop loss value
Basically, all the 100% rules based trade management activities can be automated using the Forex Trading Troll.
To make things even easier, I provide Presets for different stop loss values. So, most of setting up the Troll to do what you want is done for you.
NOTE: I only use The Forex Trading Troll for managing Forex trades (not Crypto trades). Plus, in order for the Troll to work, your trading platform needs to be running and connected to the Internet. I accomplish this by using a Virtual Private Server.
As you can see, my trading approach has been strategically designed. Yes, that means putting the odds in our favor so we can be profitable over the long term. But it also means using trade management techniques to help signal subscribers trade the signals correctly and deal with the emotions of trading.
In an effort to be as transparent as possible, I’ve explained exactly what you should expect in terms of trade management. Plus, I’ve even provided a trade management tool to help you automate some of the trade management.
I hope this knowledge increases your confidence in the signals and your ability to trade them correctly. Plus, if you decide to use the Troll, most of the trade management is done for you… which means you are less likely to make mistakes or interfere in the trading.
At PMTW Trade Signals, we have rules to help you succeed, and tools to help you stick to the rules.
In short, YOU can do this.