Trader Tip: Stop & Go Order Management Most Trade Plans focus on Triggers, Filters and some Order managements aspects, mostly Stops and Targets. Though all this is good, traders often over look other potential strategies that use order types. Most traders know the 6 basic entry order types (Buy, Sell, Limit Buy, Limit Sell, Buy Stop and Sell Stop) that are used in the MT4 trade venue. The first four are often used, but our experience shows that less than 10% of traders use stop order types. Perhaps an oversight by traders, but in the article we want to discuss a way you could use these entry order types into a Trade Plan. We call this Trader Tip, Stop & Go Order Management.
This order management technique is best used for breakout-type Trade Plans. The mechanism allows the trader to enter a trade where a trader might not be able to be present all the time in front of the trade terminal and/or the speed of price movement is too fast at the point of entry to catch the break. It also allows the trader to play either side of the break, by catching the breakout with two stop orders in opposite directions, though once entered, the trader would need to present to lift the unfilled leg once a leg is filled. Do note that in general (and on the MT4), stop orders are MIT (Market if Touched) when executed (so some slippage may apply on actual price entry, which can be significant if the break is hard, often due to a news event – so caution is needed). The best way to describe this technique is to use a couple of examples.
In example one, let’s take a look at how one might use this order management concept when trading flag breakouts (click on the thumbnail for better viewing). In this example, we can set both buy and sell stops on either side of the flag tip to catch the break in either direction. Though flag false breaks occur, in general, the price will move the length of the flag in either direction. Consult the links below to see more on how to trade the flag pattern.
In example two, let’s take a look at how one might use this order management concept when trading horizontal price box breakouts (click on the thumbnail for better viewing). In this example, we can set both buy and sell stops on either side of the horizontal price box to catch the break in either direction. Though horizontal false breaks occur, in general, the horizontal price box pattern, price will move the width of the price box (times 2 to 3) in either direction, if the horizontal price box is narrow enough. Consult the links below to see more on how to trade the horizontal price box pattern.
Now this Trader Tip merely discusses the order management entry mechanism. You will also need to consider the more overall context of the trading strategy in a Trade Plan, and fix your stops and targets accordingly. Click here, or watch below a video presentation of this Trader Tip.
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