I originally titled this post "Holding Your Ground" because I had just hit target 1 on a trade where I was immediately taken far into the red, only to make a comeback over the next few days, but the more I thought about it, the success of this trade wasn't solely based on having confidence in my stop, rather learning from past mistakes and putting it in a smart place to begin with.  As I trader I believe that trade management skills may be more important than being able to identify trades.  Obviously you need to know how to find profitable setups but if  you're unable to pick the proper entry point, place a safe enough stop, or pick the correct area to take profit off then you're screwed and will lose money.  Trust me I've done this and it's not fun.  I decided to call this post "Putting It All Together" because I felt as if this trade was a perfect example  of putting all of those skills together and having it pay off. 

I originally took the trade on what I was taught to be called an "aggressive C" buy.  Predicting that the market would reverse off a fib point (78.6) and go on to form an advanced pattern (Gartley, Bat, Butterfly).  There was some good structure towards my entry point so it qualified (by my rules) as a worthy trade.  However, instead of placing my stops below that particular structure area I looked left of my chart and noticed another spike low. I've learned to always look at past price action just to see if there are any areas that I need to be concerned with.  I've been stopped out of trades in the past by selecting the wrong area of support/resistance to take seriously so I knew that it would be a much wiser move to go with this other area of structure . Sure it increased my risk by a few more pips, but I felt that if I was correct in my analysis then it was worth it.  And again, I had taken a few trades in the past where I was stopped out, only to see the market rally and make profit without me.  

As you can see on the chart the market immediately shot down past the recent structure area only to retrace and form a new structure area followed by another shot up giving me a chance to bank half of my position at target 1 (which was also determined by using a combination of Fibonacci analysis and looking at the structure around that area.  Again in the past I used to go strictly by the fibs and I had many cases where price action would reverse a few pips before my target because of a structure area that I overlooked.  So now I take both very seriously and simply try to predict where the market is most likely to go before hitting some resistance (by structure or fibs) and set my profits BEFORE that area just to be safe. After all I'd much rather take 10pips les sin profit than lose the entire load.

I wrote this post not to brag about a winning trade, (because I know you guys can care less, but to demonstrate how having proper knowledge of the market can be used to manage a trade and hopefully hold on to a few dollars that would otherwise fall victim to the market. I didn't mention it earlier but I also tracked this trade on the 60m chart and was able to move my stops up and decrease my risk even before target 1 was hit. Which is something I like to do a lot if the market gives me that opportunity. But again, you have to have rules that tell you what signals allow you to do so, because if you just randomly start moving stops up, you'll wind up getting whipsawed and taken out on a trade that will go on to win.  The overall key is to remember the mistakes that you've made in the past because similar situations will occur in the future.  And if you make the same mistake again, well that's just plain dumb. However if you learn from a past mistake and use that to better your  strategy or technique the next go around. Well then you're on your way to some real trading success assuming you stay consistent. 

To see the chart of this trade please visit the Chart Talk section of this site. 

Thanks, Akil. L. Stokes

@IamBusinessTR

Yesterday was another slow day in the market. Seems like this entire week has been slow to me, but that usually happens after an action packed week.  A good thing about a slow day is that it frees up time for me to get some back-testing done. (For those who are unfamiliar with back-testing, it's when a technical analysis trader takes his/her strategy or system and goes back through historical charts and tests it). My day trading strategy uses a 15min chart so I usually like to go back a year, but for those who use higher timeframes I would go as far back as you can. A few things I like to look for in my back-testing are  1)Profit  2) Draw-down and 3)

Win percentage.  Profit is important for obvious reasons; I want to see if the pair I'm testing is profitable or not. Next I look at draw-down. Not only do I want to see how much I average on a loss, to make sure I don't blow out my account, but I also want to make sure that a particular month doesn't clean out the earnings of another.  Personally I don't like to see more than 2 losing months in a row and if I more than four losing months throughout the year then I usually stop testing the pair and move on to another.  Lastly I look at my win percentage.  I like to look at this statistic in order to give me a confidence and calmness when I trade. If I know that my win percentage on the EUR/USD is 50%. Then I know that after a few winners, a loss is bound to come. That way when the loss does come I'm not in shock or upset, because it was expected.

Now for the lesson well learned.  It is important that you finish what you start. I recently back-tested a pair that looked very very promising through the first 9 months of testing it. I was honestly very excited and was seriously thinking about just adding the pair to my portfolio and trading it with real money. Then a little voice in my head (my trading mentor Jason Stapleton from 4xtraderslive.com) told me to finish the entire year first. I did so and the last 3 months went horrible. My losses is those final months completely wiped out everything I had earned during the year. I'm not sure how the pair is doing now, but after seeing that, I knew it was something that I didn't want to get involved in.