How to make better trades using simple trade management rules

Trade management rules can help you to make better trades. I noticed that many short term swing traders but also mid term position traders and active investors do not pay enough attention to rules that could help them to learn how to trade stocks better and make money.

There are many discussions on stock market forums about how to pick stocks, what are major terms and definitions for best market screeners. But there is quite small amount of discussion about terminology like the better setting of entry point, how to purchase stocks better way, how to sell stocks or how to swing trade stocks.

Good stock trade is not only about picking best market ticker. It is also about best setup that describes how to make better trade with selected shares. The complete stock market trade is defined by several terms that are needed if you want to do better trades that make money.

Trade management by trailing stop

Stock market basics of trade management

Complete trade management contains several steps and rules that must be done if our stock market trades should lead to better monthly gains that we could enjoy.

Equity position setup that could lead to better market trade should be prepared in advance. You have to have entry, stop and exit points prepared in advance for any position based on your online trading system It’s much easier to prepare a good setup during analysis made outside of exchange opening hours. This actions should be part of your pre-market routine for market analysis.

Then it is necessary to take care of your opened position. The best trades are well managed. Regular monitoring and management of opened positions has to be done every day for short term trades. The rules how to do this management routine should be incorporated in stock trading plan that describes your system.

Basics stock trading terms for simple stock trade management system

Active management of opened positions is done during regular trading hours. The simple trade management system includes these basic steps:

1. Entry
   Good trading software  should alert you that share price is near your entry trigger value. Prepare an entry order (for a long or a short position) and wait for the entry order for this particular ticker to be executed.
2. Place the stop
   Immediately after your entry order is executed, you have to place a protective stop-loss order based on your trading plan.
3. Move the stop
   While the trade is moving in your favor, you must apply some trailing stop rules. It’s a good idea to move your stop-loss level if your trade is working well. It helps to decrease financial risk and also emotional stress. What I can recommend is to move your stop-loss level to break even (near your entry point) as soon as your trade reaches the 50% level of the expected profit target.
4. Take profit
   This issue is not as easy as you think. Position is open and every P/L profit is virtual until it is totally closed. If your trade wasn’t stopped by a trailing stop, then it is very good to have some points where you will take profits. It’s important to take a profit for most of your positions near your target point. Don’t be greedy, and if you see the price is near your profit target (+/- 0.1 or so), monitor it closely. If you see that the price has a problem, take a profit immediately. Do not risk a big correction for only a little more gain.

Set daily and weekly management routine to make better trades

The best way how to accomplish better targets of our stock trading system is to define regular routine for position management. Such management routine should describe how do you monitor your opened positions and when do you act – i.e. enter, move stop or realize profit.

This management routine also has to define steps for monitoring of stock market tickers that you have in your watchlist as best pick with trade setups for possible entry this particular day.

Such regular routine that allows to perform simple trade management system will help to achieve best results for any stock trading system but also for any online stock market investment strategy.