In this video we will see other fundamental principles for money management, including stop loss, take profit, position management and unit move. A stop loss is an order that blocks our losses. An indicative example for the management of the position is to insert a stop loss that never goes beyond 5% of the total capital.
It is true that 5% is a fairly high% as the maximum loss on each individual transaction, but since the spread is a medium-long term strategy, it must be allowed to breathe to be managed correctly.
This does not mean, however, that I always have to risk 5%, even when I remain in line with performance of at least 5%.
Next, we evaluate the volatility of a spread to understand where to put the stop loss. Volatility is nothing more than a measure of the change in the price of a financial instrument over time, so the more volatile an instrument is, the faster the price changes and therefore it is usually more difficult to manage and control. In an intramarket spread, prices tend to change less rapidly than intermarket spreads.
Take profit is the order of exit to make a profit. It is advisable to have at least a r / r = 1: 1 ratio, so it will also be given as a function of the previously defined stop loss.
Location management
When the capital allows us to carry out the transaction with + contracts, perhaps not entering directly with multiple positions but making staggered entries only to be able to serve a better price, especially in the case of a not too sudden departure of the spread.
Even if you cannot afford to have 3 contracts on the single spread on the platform, it is a good idea to try to manage the position as carefully as possible.
The important thing is never to move the stop loss to a lower level than the one set in our initial plan, but instead to move it upwards if the spread trend moves in our favor, trying to position it in a way (break-even) as soon as possible , always leaving some breath to the spread.
So with low volatile spreads (see narrow Bollinger bands) it is possible to keep closer stop losses, and vice versa it is not possible with wider volatility spreads (see large Bollinger bands)
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