If you ask any professional trader what is the most important rule when trading; nine times out of 10 the response will be money management. Any two traders can enter the market at the same time and same price but the success and longevity of a trader is based upon his exit strategy and money management. I have been conditioned to ensure that before a trade is placed I have a predefine stop loss level, which is usually 1% of my account. In addition, predetermined profit target zones are also identified.
I am a technical trader who pays close to attention to breaks of trendlines and support and resistance points, both calculated and visual (psychological). As a trader, I prefer to wish to be in a good trade than to beg to be out of a bad one. Patience is a quintessential component in forex trading; I never rush to take a trade.
One of the strategies I employ when trading the Mansa Wealth, Skyline managed account is a breakout strategy. My trades are based off of the daily and four-hour time frames. These longer time frames act as a filter and prevent whipsaws which you will find more frequently in the lower timeframes: 30-, 15-, five and one-minute timeframes. The daily time frame is used for direction and helps to identify bounces off trendlines and or support/resistance points. The four-hour time frame is where I will enter my trades and identify my stop loss and take profit zones. As previously mentioned, all trades placed must have a predefined stop-loss.
This article was originally published on May 1, 2010 in Futures Magazine by Nicholas McGaw. For more information, visit www.futuresmag.com