Original subtitles

Keys to Position Management Let's not forget that our main objective, over and

above looking to maximize profit, should be the preservation of capital. For

this reason, among other things, we actively analyze market sentiment. We

conservative approaches in our trade operations and we risk low percentages

our account capital.

Our style is reactive and defensive, the best strategy for achieving our goal.

In this section, we are going to look at some concepts that will help us to

achieve our objective of preserving capital.

These are concepts that are sometimes overlooked but can greatly influence our

long -term result.

The first of them has to do with the trading period and with the release of

fundamental data.

Regardless of the asset you are trading in, there will eventually be some

fundamental news or some critical moment in the market in relation to it.

Knowing when this will happen can help you carry out the proper position

management.

With regard to trading hours, it's worth noting that trading sessions experience

their highest volume during the hours when they overlap, since this is when

largest number of traders are active.

This is especially the case in currency trading.

If, for example, you trade in futures, let's say S &P 500 futures, two of the

moments to avoid are the opening and closing of the market.

The highest concentration of activity occurs at the opening of the American

session. During approximately the first hour of the session, it is very

difficult to follow the behavior of the market.

Upon the opening of the session, all the trades that took place when the market

closed are reflected in price.

This generates a high level of generally random volatility that can skew our

strategy. For this reason, it is best to wait a few minutes until the market

digests all that noise and the majority of traders start to position themselves

with intent.

and a great deal of volatility is also generated minutes before the close of

session, which could reduce our position.

In this regard, you should also take into account the overnight risk of

the position while the market is closed.

Regarding the release of fundamental data, one of the best tools available to

is the news calendar, specifically one showing news that can significantly

impact the price of the asset which we are interested in trading.

A huge amount of news is consistently being broadcast, so you need to filter

and take into account only the most relevant items.

Depending on which market you want to trade in, certain news items will be

relevant than others. For example, if you invest in stocks, you will be

interested in the financial results of companies, which are usually presented

a quarterly basis, as well as the news specifically related to each asset.

Certain economic data can have a huge impact on the economy as a whole.

such as interest rates, CPI, GDP, and employment reports.

For example, if a fundamental event concerning certain economic news that

affect our position is about to be broadcast, the most sensible thing is to

manage the position to protect ourselves from potential volatility.

In reality, in this scenario, the most advisable thing to do is to leave the

market immediately, especially if you are intraday trading.

Other dates that should be monitored closely are public holidays during which

the markets are closed, as well as common celebrations such as Christmas,

Year, and religious holidays.

Each country has its own holidays on different dates, such as National

and Labor Day, among others.

The page investing .com is a really useful site since it summarizes all the

events in one place, so it's definitely something you should look at.

For stock trading, TradingView itself also has a tool that informs traders

the days remaining until the release of the next earnings report.

You can find it in the lower right part.

In this example of an equity, there are five days left.

Bear in mind that on many occasions the effect we are waiting for a campaign to

have occurs due to the release of this type of report.

This is what happens in this other example.

We are in an uptrend and the market is beginning to develop a potential

reaccumulation structure.

What happens? The earnings report is released, which happens to be well

by the market and this sends the price up, even generating a huge gap.

I personally don't avoid trading using the news as an input if the context

suggests that an accumulation is possible.

Of course, there will always be that additional risk that if you are wrong,

loss could be greater than that established by your original stop loss.

for the same reason we see illustrated here.

If the market opens with a gap below, instead of opening above, your stop loss

would be executed at that opening price below, considerably increasing the loss.

Moving on, we are now going to look at the next key issue, which has to do with

the nature of trade.

We often think that the position we are about to open is the one that will make

us rich.

We start looking at longer time frames.

with the aim of turning that trade that was the result of a short -term analysis

into one that is going to look for major long -term movement.

Of course, 90 % of the time, this will not happen. And the worst thing is that

it could be a good trade, but we lost out on obtaining more profits from it by

not properly managing the time frame.

The trade should always be managed in accordance with the trading time frame.

Don't expect trades that were born in the short term to become major trends.

Although it is true that on occasion this could happen, usually it is not the

case. This chart shows an example of this concept.

Assuming we have managed to enter at that spring, we need to manage the

in this time frame and use the liquidity zones that most immediately appear.

The liquidity zone that we see in the upper part, if we make use of

undoubtedly corresponds to a price pivot in a longer term time frame, so that

should not be our priority target.

It would not make sense to enter that accumulation and wait for that very

distant liquidity zone as our first profit -taking opportunity.

Could the price even reach it? Of course it could. And perhaps we should place

some of our position in the hope that the market reaches that more ambitious

target zone.

But before getting there, the price must pass through other zones that could

generate a change of control.

And these zones are the ones we should use for our position management.

Be very careful with this.

because it is something that happens frequently, especially among beginners.

The closing price of a candlestick is one of the most important pieces of

information, telling us about the commitment and quality of the traders

entered in that direction.

Don't try to anticipate your entry, because you will expose yourself to

unnecessary risk.

Imagine we are in the trading zone awaiting our entry trigger.

Let's assume it is a candlestick showing intent.

Then we see a candlestick that at first glance seems to have the characteristics

we are looking for.

But before the candlestick ends and closes according to its time frame, we

decide to enter in an attempt to anticipate the entry.

And surprise, surprise, just before the candlestick closes, a minor imbalance

occurs in the opposite direction indicating exactly the opposite

were looking for.

You may think this can't happen.

but I assure you that the sentiment of the candlestick can change in seconds or

minutes. We do not know what type of information is about to be released to

market, or if it will be before, or after, or how the market itself will

That is why it is essential to wait for the closing price, since it allows us to

determine the sentiment of that particular candlestick.

Sometimes, you might enter the market in the wrong manner.

perhaps in the way described in the above example, when trying to anticipate

your entry.

What do we do then?

Close the trade immediately.

Abandoning the position is the most advisable measure.

You have not followed your trading plan. It is not a trade that offers any

guarantees or confidence, so there is no point staying in it, hoping that the

market will go in our favor.

When it comes to the market, we must put our feelings aside and act as coldly as

possible. And in this situation, there can be no excuses.

Accept your mistake and close your position.

The example seen previously is just one type of bad entry, but there are plenty

of others.

For example, that instead of buying, you have placed a sell order.

That instead of one unit, you have bought 10.

That you are looking at the wrong asset even, especially if you are managing

several in your follow -up list, that you make a mistake in the type of order

and you have entered with a buy limit.

instead of a buy stop, to buy at the break of the trigger candlestick.

You might even apply the wrong strategy, realizing later that your analysis of

the roadmap was wrong and you have entered the wrong side.

These are just a few examples, but the possibilities are endless.

If you realize you have made a mistake, the key is to try to correct it as soon

as possible, even if it means taking a loss.

Don't let the market reward you for a poor performance.

Trades can be good or bad regardless of the result.

If you do everything right, if you follow your trading plan and execute

everything as established, but still the trade has a negative result, the trade

is still a good trade, because you have done everything you had to do.

The negative result is only due to the inherent variability of the markets and

of the result. This shouldn't worry you.

What should worry you is a positive trade having carried out poor

These types of trades are bad because on this occasion, it may have gone well

for you, but the next time, it almost certainly won't.

And if you have been rewarded even after doing your job badly, you are not going

to correct your mistakes and your learning process will be all wrong.

It is critical to realize that doing things badly is not profitable in the

term. Doing things well is, even if that means that in the short term, you have

to accept a loss.

Assuming we have done everything correctly and we are already in a

situations will continue to appear that should set the alarm bells ringing and

make us consider an early exit.

Once our order is triggered, if we enter the market and see that the market is

not moving in our direction, but starts to fluctuate up and down without any

clear direction, or simply goes against us, this may be a sign that the market

is not yet ready to initiate the movement that we are expecting.

Objectively, what we see is that the momentum that we expect the market to

after the appearance of our trigger has not taken place.

And therefore, after a while, without seeing this reaction, this would suggest

that there is a good chance the price will hit the stop of the trigger

candlestick. In this case, you might want to think about reducing your risk

exposure before the stop loss closes everything.

You will never know to what extent you are making a good decision.

But if for whatever reason you don't feel comfortable with the trade you have

open, you can close a percentage of it.

This may be a good way to remain emotionally calm.

Bear in mind that you can always re -enter later, if the market sends out

signals.

In the example on the slide, we see a potential spring in a bullish uptrend

breaking through two previous lows and creating a candlestick that we could

used as an entry trigger.

The next candlestick activates the order and automatically goes against us.

At that point, We have already confirmed that the momentum that we needed to

take place after the appearance of the trigger candlestick has not happened.

So, there is an increased chance that the market will have to carry out a new

test at the lows to assess the commitment towards the short side.

In this case, it is a very light test that barely breaks the lows of the

previous pivot, but it could have fallen a lot more and triggered the stop loss.

Another situation in which we should exit early is when we observe a volume

that continues going against our positioning.

Imagine that we have entered that false breakout that takes place on the lows of

that structure, and that in the middle of our trade we observe an unusual peak

in volume with a clear bearish sentiment.

Until the appearance of that event, if we have not done any type of position

management, this is an input significant enough to at least protect it by

placing the stop loss at the entry point, so that if the market continues

fall later, we don't take a hit, as was the case in this example.

More important than the volume itself is the price reaction to that volume.

If the same volume peak had generated a bullish candlestick, our interest would

not be affected initially, at least until seeing the subsequent price

This is exactly the same concept as that of climactic volume at the breakout.

We will always want to be on the right side of the last volume peak.

Anything different to this, and we should consider carrying out some form

position management.

And finally, we are going to deal with the situation where we see a strong

movement against our position.

Imagine we are in this uptrend context and we see an opportunity in that false

breakout at the previous low.

The market begins to move in our favor at some point and it generates a strong

downward movement for no apparent reason.

Since at this point where that bearish candlestick develops, it is highly

that the move to lower prices will continue, we should do some management.

In this case, it might be advisable to use a stop loss below the low of said

candlestick, just as we learned with the concept of the mental stop loss when a

strong re -entry into the range occurs.

Why this kind of stop?

Well, because it could be the start of a possible shakeout and reverse upwards

in the next candlestick, as previously happened.

Then it would be a matter of moving the original stop loss below that

candlestick to cover two possible situations.

In the event the market continues to fall, as it did in this example, we cut

losses. And at the same time, we leave open the scenario of yet another false

breakout prior to the price moving higher again.

This is the best type of management for either of the two scenarios.

When we open a position, we have several ways of managing it.

And in reality, one way is no better than another.

Here we are referring to how we are going to distribute the amount that we

allocated to that position.

from both the point of view of the entry and exit.

With the type of all or nothing management we define the entry, stop

take profit points.

We enter with a full position amount and allow it to develop until it reaches

the stop loss or take profit level without doing any additional management.

The main advantage of this style is that the trader in no case has to manipulate

the position, avoiding the possibility of making bad decisions, guided by

feelings such as fear or greed.

But this is a double -edged sword because it is also its biggest

By not being aware of what is happening in the market, we may indirectly assume

a greater risk, because we will not act even if our analysis suggests that the

market sentiment could change.

An example of this type of trade can be seen in this chart.

We set up the orders and let the price develop.

Many traders, myself included, feel comfortable taking partial profits.

This simply means, once the market has advanced in our position and we have

obtained certain latent profits, closing part of the position and securing these

profits when the price reaches some key trading zone.

The market is an environment full of uncertainty, and it is constantly

in its very nature, so we need to be able to analyze and interpret the

information offered to us very quickly in order to make decisions that improve

our risk management.

There are several ways of taking partial profits.

A simple way to do this is to divide the size of the position into two parts,

allocating the first part to the first take profit, and a second and last part

of the position allocated to some distant trading level.

In this case, we would be talking about taking profit 1 and taking profit 2 due

to the two closing positions.

One thing you can decide is how to divide the position size, that is, what

percentage of the position to allocate to each of the take profits.

You may choose 50 % for each take profit, or 60 -40, 70 -30, etc.

Generally, the first part of the position is usually allocated a higher

percentage. If you plan on taking partial profits, I recommend allocating

least half the position to the first take profit.

But maybe you want to split the position into three parts instead of two.

This is also another widely used practice.

For example, We allocate 50 % of the total position size to the first take

profit. Then we will leave another 40 % for a second take profit.

And finally, since this third part is more complicated to achieve, we can

the remaining 10 % in the event the market is very unbalanced in one

and not many movements take place in the opposite direction.

As well as taking a partial profit, the trader in this case will protect the

position at the break -even level.

Psychologically, It is very reassuring to know that for the rest of the

you will no longer be able to incur any losses and that also, whatever happens,

you will close the position in the black thanks to the profits that you have

already secured.

As we can see, this is another example highlighting how diverse the

possibilities are.

You can include the break -even or not.

Nothing is written in stone in this regard.

But if you are in front of a screen and you are able to actively manage your

trading more, I highly recommend you do so.

This term describes the action of relocating the stop loss level by moving

the level of the entry price.

With this, we can protect the position so that if the price reaches this level,

we exit the market without losses or gains.

Bear in mind that in order for us to exit the market with a net result of

we must make sure that we factor in all the different fees we have to pay.

As a result, it is common practice to take the stop loss slightly behind the

entry level.

The key question here is, when is the right time to put the stop loss at break

-even? As always, this will depend on the trader and their strategy.

I recommend doing it in two situations.

One, after the first take profit is reached, because at that point the

will have reached a liquidity zone and we should protect ourselves.

Two, when a certain imbalance or event occurs in the market that suggests a

change in sentiment that goes against our position.

For this reason, it is important that you are proactive when managing your

position.

This chart would be an example of the first scenario, where we would modify

stop loss location upon reaching the first liquidity zone.

And this second example corresponds to the second scenario, where we would

modify the original stop loss when an event appears that could change the

sentiment, such as that peak in volume and the bearish continuation of the

price, an example that we have already seen before.

In this situation, the trade would lead to a profit for the first part of the

position and a break -even for the second part, since the stop loss was

triggered before the price could reach the second take profit located at the

maximum pivot.

This type of management is very useful since it adapts to any new information

that is being incorporated into the market, which we should be actively

identifying. A double entry means entering the market at different prices,

different trading situations.

And depending on how the second entry is carried out, whether it is done at a

better or worse price than the first entry is known as averaging or

With the averaging method, we divide the entire position into different packages

and make different entries until it is complete, but always subject to the

context and the strategy of the trade.

Let's say you want to buy an asset, but it isn't at the optimal point for you to

enter. That even though it is in a trading zone, it is feasible that it may

down even further.

given the proportionality of its movements or for some other reason.

But of course, at the same time, you are afraid that the market will leave you

behind, that it will initiate the movement you have forecast, and that it

not visit that trading zone which offers you the best chance of entry.

Well, one way to solve this would be to enter at that first trading level,

assuming it offers the entry trigger with a part of your position, and leave

another part aside in case the scenario in which it reaches the trading zone at

the lower prices finally comes to pass.

re -entering there when it offers us a new entry signal.

This chart shows an example of this.

We already know that our job is to identify all possible trading zones that

price could visit.

In this example, we see that after the bullets break out, we have two potential

levels, that of the upthrust action and the high that establishes the AR.

If the market offers us an entry trigger into the first, since we know it could

still reach the second trading zone as well, we could allocate 50 % of the

position size to each of these.

In this way, we would enter with half the position at the first entry trigger

and with the rest only in the event that a possible entry opens up in the second

trading zone.

Our biggest problem would be if our entry trigger doesn't appear in the

trading zone and instead the price re -enters the range again, meaning all

movement was just a false breakout.

In that case, we should have previously established the maximum zone or level

where we would allow the price to re -enter.

At that point, we would close the position without hesitation.

For this, we know that we could place the stop loss in the middle of the

structure as the worst case scenario and even apply the reasoning for a mental

stop loss in the event that it re -enters the range with force.

If you look closely, the entry level for both scenarios is practically the same.

So in this case, we would not be able to take advantage of the entry at a better

price. This can happen.

it will be determined by the very nature of the market.

At the same time, it is important to point out that, given the proximity

the entry level and that of the first liquidity zone, in this case, I

tend to take profits, but I would modify the stop loss to place it at break

-even.

Pyramiding involves the opposite approach with regard to location of the

levels. Let's suppose that we are at the final possible trading zone, waiting

for the entry trigger indicated by our trading approach.

but for whatever reason we do not feel as confident as we would like.

If the signal finally appears, we could enter the market with part of the total

position and, unless the price goes in our favor, not enter it again.

To do this, we would have previously identified the trading zones and planned

our possible scenarios.

For our second entry, we would wait for the price to position itself in favor of

a new trading zone, or one previously identified.

At that point, we would execute our entry signal again.

At that moment, we would have used the entire position.

This is exactly what happens in this example.

After seeing that distribution pattern, the initial scenario does not offer us

many guarantees, so if we see our trigger, either we do not take the

and wait for a more favorable situation, or we only use part of it. This would

be the more aggressive trade.

Assuming we had taken the position, the middle level of the distribution

structure should have been used for the take profit for that first entry, total

or partial.

And then, we see how the price generates a test on the low of the minor

structure, which, in essence, would act as a spring test, so any entry

opportunity there should be taken.

At that point, we would have already taken the two parts of the initial

position.

We would have a second take -profit opportunity for this trade at the high

this structure.

From there, since the general context is determined by the accumulation

structure below, it would not be unreasonable to set aside a third of the

position to try to take advantage of a greater effect of the entire cause that

has been built.

The main advantage of this approach is that it reduces risk in the event the

first trade results in a loss.

If we enter in the last zone and the price reaches our stop -loss level, the

loss will not be for the entire position.

It will only be for that first part.

However, the main disadvantage is that you will obtain lower profits if the

trade eventually turns out to be a winner, since for the second part, you

have entered at a worse price.

The work dynamic in all trades will be exactly the same. When the price reaches

a trading zone, a liquidity zone, we will always implement some type of

management, either close the entire position taking profits, taking a

profit and protecting the rest, or at least moving the stop loss to break even

and protecting the position if we do not want to take any profit.

as we saw in one of the previous examples, because the entry price and

position management zone are too close.

This is also the case when we see any behavior that goes against our interests

that suggests that the market could turn.

At that point, you may or may not want to take profit, but at the very least,

you should protect the position.

The key, as I already say, is to maintain a defensive attitude, always

prioritizing the preservation of capital.