Splitting your trade positionsweekly video
In this weekly video:
00:34 – Most people enter at the market
01:00 – Trading the longer time frame charts – look to split your entry orders
02.33 – The keys to trading
03:13 – Taking a part of your position at the market and part at a retracement
04:30 – Entering on a retracement
05:20 – Use these lessons to help your trading
In today's video and podcast. I'm going to explain why I like to split my orders into two or more parts. Let's talk about that right now.
Hi Forex traders, Andrew Mitchem here, the owner of the Forex Trading Coach. This is video and podcast number 213. I'm going to be telling you and explaining. Why I prefer to split my positions up into two or more parts.
Most people enter at the market
You see, so many people tend to just see a trade, enter at the market, take the trade and that's it. For me, it's like well, that's okay but there's a better way of doing that. If it's a shorter timeframe chart, let's say it's a one hour chart and below where you want to ride the current momentum of the market, then fine, jumping in straight away at the market is a good idea.
Trading the longer time frame charts – look to split your entry orders
If you're trading a slightly longer timeframe chart, say a four hour chart or six or twelve or daily or weekly, whatever it might be, those longer timeframe charts where you do get retracements and you have a bigger stop loss there for you can allow for the upward and downward movements in the market, when you get those longer timeframe trades and charts that you're trading, they definitely a retracement entry is a great idea.
Well why? What I like about it, number one, you don't have to be at the chart when the candle closes. So if you're not taking a market order that you don't have to be there right at the time that four hour chart closes, let's say. You can come to charts a little bit later and still enter a trade.
The other thing is, if you're taking a retracement order using a sell limit or a buy limit, depending on whether it's a buy or sell trade, then the great thing is that you don't have to be there at your computer at the time that that price is hit because the limit order, the pending order, is stored on your broker's server. You don't even need to be there. I'll give you an example, if I'm trading say like a daily chart, then I'll enter and let's say it's a buy trade, I'll enter when the price gets lower first, but I'm not sitting there waiting for that to happen.
I‘m seeing the trade, I'm saying yeah, I like this trade, I'm entering a buy limit order so when the price retraces and gets lower, it's then filling my buy trade. It means I get in at a lot better price, like a lower price but it also means that my reward to risk on that trade is substantially increased.
The keys to trading
Don't forget that some of the keys to trading apart from low risk money management are high reward to risk trades. It's really important that you have that. You want to be making several times your risk.
When you get a profitable trade and it gets to your full profit target, you need to be making one and a half, two, three, four, sometimes even five to one reward to risk on that trade, depending on the setup of the trade. It's really important that you have the ability to take those high reward to risk trades and by entering part of your position at a better price using those limit orders and retracements is a way that you can really easily do that. Lots of benefits to that.
Taking a part of your position at the market and part at a retracement
I also do like to take part of my position straight away at the market on most trades that I take. Reason being, is let's say you're taking a buy trade and the candle closes near it's high and it just keeps continuing upwards without a retracement, and it can do that from time to time. When that happens, of course I don't want to miss out and I've got my order only at the retracement and it doesn't retrace enough to get it filled, but then it gets to my profit target. That can be slightly annoying when that happens and of course that's part of trading.
It also means that if I have a part of my overall position in at the market. Then at least I get profit on. Let's say half of that trade and the other half. Which is a the retracement doesn't get filled, that's fine but at least I get profit on the part that was in straight away. The ideal situation of course, is you get the retracement and then the price turns around at around that level that you get filled at, you have a very small draw down on that retracement order, it then goes back up again. If you're taking a buy trade, it gets obviously your buy limit in at the retracements, that's in great profit.
It then gets past your market order and that then starts to get into profit. And then fills both positions and takes that full profit on the both of them.
Entering on a retracement
That's the ideal situation and when you understand retracements and how to enter on retracements. I've got a really easy way of doing that. And of course, with all my trading I like to keep it really simple and an easy way to see the trade, take the trade, regardless of the timeframe, regardless of the currency pair. It's really important that you have the ability to do that. That's it. hope that helps.
I hope you also liked the background. Had some really positive comments and feedback from people with last week's video and podcast saying. “Hey Andrew, liking the look of summer there in New Zealand”. As you can see, more blue skies again this week. So we've had a really good time through January and February. And for those of you in the northern hemisphere where it's winter. Well I hope you're keeping warm, but for us this side of the world. This time, January, February, March is just a beautiful time of the year. Summertime, great time to be in that pool as well.
Use these lessons to help your trading
Take that lesson and let it help you with your reward to risk ratios. I just saw that, I'm pointing about the pool behind me. If you're listening on iTunes you probably have no idea what I'm talking about. But there's a swimming pool behind me. I'm going to go and enjoy that right now.
Enjoy your trading, have a great weekend. I'll see you this time next week.