Trader Tip: Stingy Trader We have discussed many times the Blue Point Trading Trade Plan Framework (click here), where we discuss the three components of your Trade Plan. As a reminder, they are the Trigger, Filter and Order Management. Each having their own dynamics, we want to discuss in this Trader Tip another Order Management technique that can boost your trade performance. Each of these Trade Plan components can be viewed independently, and this Order Management technique is no different. When appropriate, this technique can be used to augment the trade productivity of a trade. The basic idea is not to use market orders to enter your Trigger entry. Be a bit more “stingy” in the price you pay for an instrument. Hence the title of this Trader Tip – Stingy Trader.
First we want to stress that this Order Management technique is not a replacement of the trade strategy. This is merely and additional technique on top of an already good trading strategy. Another point is to use when appropriate. For example, if the trade is not providing good low tick level oscillations with reasonable liquidity and the trading strategy requires you to enter, perhaps a normal market order is more appropriate – so good trader discernment is required.
So the concept is quite simple. Instead of performing a Trigger entry with a market order, do a limit order entry that is 1 to 3 pips better. In other words, scalp the entry. Note that this scalp limit order entry should have a relatively small “time in force” amount – say 1 to 10 minutes. You will find that you generally can get the entry desired (90%). The difference with this scalping strategy is that there is no trading loss achieved if wrong, rather just a lost opportunity. Scalping strategies alone are generally poor trading strategies.
In this article we provide a couple of examples that can be seen better if you click on the thumbnail chart images. You will find both a breakout and a pullback and continuation trade strategy example, where this Order Management technique is pictured. Note the light blue Target execution line as the Trade Plan would dictate and then the darker blue Target execution line of the improved Order Management technique. We can see that we can earn a few extra pips in profit and/or lessen the impact of a stop loss. In short be that stingy trader and don’t pay the asking/offered price.
When looking at your completed order book at the end of a trading month we may have between 25 to 50 trades conducted. If we can improve each trade with this order management technique by 1 to 3 pips for each trade, we can boost overall trade performance by as much as 150 pips for the month. So give this a try. As a reminder again, these order management refinements should not violate the basic premises of the original Trade Plan. Click here, or watch below a video presentation of this article.
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