Position management – Swing trades

SL

For every swing trade I use different SL. It is because I search the chart for the best place for the stop loss order. When I publish a new swing level I also mention where my SL is (usually in the Swing Video Commentary).

However, there are more ways how to exit a losing position

  1. Basic SL approach: Exit your position when price hits your “normal SL”
  2. Alternative SL approach: Exit your position only when the day closes past your “normal SL”. In this case you don’t know in advance what your final SL is going to be. It is not easy to manage such positions from the money management point of view. For this reason I use “catastrophic scenario SL” These are 1.5 or 2 times the “normal SL”. If the price hits “catastrophic scenario SL” – I am out of the position. With this you can at least tell how much the absolutely worst scenario will cost you. In illustration below you can see a short trade that would end up in SL (if you used the basic approach). However, If you used the other approach this position would eventually end up in profit.

  • It is important to bear in mind that for every swing trade you need to risk the same amount of your trading capital. Because the SL is different for every trade, you have to calculate your trading volume for every trade separately. I recommend using some position size calculator. For example this one: position size calculator

PT

My PT depends on how far my “normal SL” is. Ideally the distance to PT is more or less the same as the distance to my previously determined “normal SL” (if I choose “normal SL” for example 100 pips, I use PT also around 100 pips). This is because I like RRR close to 1:1. However, there are more ways to trade my swing levels. Here are some with very good results:

  1. RRR 1:1: When trading this way I don’t move my SL. There are only two possible outcomes: full SL or full PT.

If you don’t feel that agressive you can move your SL in simillar way like in intraday trading i.e.: move SL below/above the reaction or at BE when you are about 70 – 80 % in open profit.

  1. RRR 1:2: You try to gain 2x more than you risk. When price reaches 50 % of your profit you move your SL below/above the reaction. For example: your SL is 120 pips so you want PT 240 pips. When the price moves 120 pips in your favour (50 %) you move your SL below/above the reaction. This method has very good results but is quite mentally challenging.
  2. The same as previous one with the exception that you don’t move your SL below/above reaction but at your break even level.
  3. RRR market dependant: RRR in this method ranges from RRR 1:1 to RRR 1:2 depending on the market conditions. This requires some skill to determine how far the move could go. I use this method when I want more than RRR 1:1 but don’t want to go for RRR 1:2 because I think it is too risky. My most frequent risk reward ratio with this method is around RRR 1:1,5

*I use limit orders when trading swing trades.

Macroeconomic events

I trade my swing positions even during significant (marked in red) macroeconomic news. There are so many of them every week that if I wanted to quit my position before every such event the position would just rarely have enough time to reach my PT which is usually over 80 pips far.This approach may look a bit agressive but it is working nicely.

There is one exception: I close all my swing positions and all pending orders before the most significant news. Those are news that are issued by  central banks and concern their monetary policy. Here are some of them:

  • Monetary Policy Statement and BOJ Policy Rate (JPY)
  • FOMC Statement and Federal Funds Rate (USD)
  • Federal Funds Rate and Official Bank Rate (GBP)
  • RBA Monetary Policy Statement and Cash Rate (AUD)
  • RBNZ Rate Statement and Official Cash Rate (NZD)
  • BOC Rate Statement and BOC Monetary Policy Report (CAD)
  • Minimum Bid Rate and ECB Press Conference (EUR)
  • Some other significant news concerning Brexit, US presidental election, significant news concerning Grexit, etc…

*If you trade your own swing trades with SL tighter than about 50 pips I suggest you adapt the rules and close the trades even before less significant macro events.

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