Trade Management
Definition
Trade management refers to the decisions made after entering a trade: adjusting stop losses, taking partial profits, moving to breakeven, and determining when to close. Good trade management maximizes winners and limits losers.
Trade management is where good traders separate from great traders. Entry is important, but what you do after entering the trade often determines more of your profitability. Key trade management decisions include: when to move your stop to breakeven, when to take partial profits, whether to trail your stop, and when to cut a trade that's not working but hasn't hit your stop.
For prop traders, trade management is directly connected to drawdown management. Moving stops to breakeven too quickly can reduce your win rate (stopped out before the trade works). Not taking partial profits can lead to giving back large gains that affect your trailing drawdown floor. There's a balance between letting winners run and protecting capital.
A popular approach for prop trading: take 50% off at 1R (securing profit equal to initial risk), move stop to breakeven, and let the remaining 50% run to 2-3R. This creates a positive expectancy even with a moderate win rate. PropJournal tracks how your trade management decisions affect your R-multiples and suggests optimizations.
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